Nigeria’s Economy to Gradually Decline Due to Security Issues in Oil Sector – IMF

The International Monetary Fund (IMF) has said Nigeria’s growth will gradually decline in 2023 and 2024 on the back of security issues in the oil sector.

The Washington-based fund projected that growth in Sub-Saharan Africa will decline to 3.5 percent in 2023 before picking up to 4.1 percent in 2024.

“Growth in Nigeria in 2023 and 2024 is projected to gradually decline, in line with April projections, reflecting security issues in the oil sector,” the IMF said in its World Economic Outlook Update released on Tuesday.

“In South Africa, growth is expected to decline to 0.3 percent in 2023, with the decline reflecting power shortages, although the forecast has been revised upward by 0.2 percentage point since the April 2023 WEO, on account of resilience in services activity in the first quarter,” it said.

While citing that global recovery is slowing amid widening divergences among economic sectors and regions, the IMF said global growth is projected to fall from an estimated 3.5 percent in 2022 to 3.0 percent in both 2023 and 2024.

“While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook, it remains weak by historical standards,” it said.

The rise in central bank policy rates to fight inflation continues to weigh on economic activity, according to the report, and global headline inflation is expected to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024.

It stated that underlying core inflation is projected to decline more gradually, and forecasts for inflation in 2024 have been revised upward.

The IMF stated that in most economies, the priority remains to achieve sustained disinflation while ensuring financial stability. “Central banks should remain focused on restoring price stability and strengthen financial supervision and risk monitoring.”

It urged countries to provide liquidity promptly while mitigating the possibility of moral hazard. “They should also build fiscal buffers, with the composition of fiscal adjustment ensuring targeted support for the most vulnerable.”

It added that improvements in the supply side of the economy would facilitate fiscal consolidation and a smoother decline of inflation toward target levels.

“For advanced economies, the growth slowdown projected for 2023 remains significant from 2.7 percent in 2022 to 1.5 percent in 2023, with a 0.2 percentage point upward revision from the April 2023 World Economic Outlook.”

July 27, 2023