The International Monetary Fund (IMF) has predicted broadening economic growth for Nigeria except in oil, while maintaining gross domestic product (GDP) rate at 3.4% by year end amid galloping inflation.
This outlook was contained in a statement issued yesterday following a meeting of the IMF team led by Ms. Jesmin Rahman held meetings with the Nigerian authorities from June 6-10, to discuss recent economic and financial developments, and the economic outlook for the country.
This is even as it notes that rising inflation also raises security concerns following the spate of killings and violent crimes in many parts of the country.
The statement reads: “Economic recovery continues to gain strength on the back of services and agriculture with GDP growth reaching 3.6 percent (y/y) in Q1 2022. Latest data shows economic growth broadening to all sectors except oil, where production remains weak reflecting continued security and technical challenges.
“Inflation has reached 17.7 percent (y/y) in May led by a renewed surge in food prices, exacerbated by the war in Ukraine, and raising food security concerns as over 40 percent of the population live below the poverty line. To contain inflationary pressures, the Central Bank of Nigeria has recently hiked its monetary policy rate by 150 basis points to 13 percent.
“Regarding the external sector, the current account deficit narrowed significantly in 2021 helped by import compression and higher net oil balance. However, the improving trade balance, which has continued so far in 2022, is having a limited impact on Foreign Exchange (FX) strains with the exchange rate premiums in the parallel market staying in the 35-40 percent range since October 2021.”
The team noted that despite supportive high oil prices, gross FX reserves fell to $38.6 billion at end-May from a peak of $41.5 billion in September 2021 boosted by the Special Drawing Rights (SDRs) allocation and Eurobond issuance.
However, the improving trade balance, which has continued so far in 2022, is having a limited impact on Foreign Exchange (FX) strains with the exchange rate premiums in the parallel market staying in the 35-40 percent range since October 2021.
The statement continues: “Regarding the economic outlook, GDP growth is projected at 3.4 percent (y/y) in 2022 while inflation is expected to remain elevated. The fiscal deficit of the Consolidated Government is expected to remain high at 6.1 percent of GDP due in great measure to costly petrol subsidies and limited tax revenue collections.
“Downside risks to the near-term arise from further deterioration of security conditions, elections, low vaccination against COVID-19 and higher global interest rates.
“On the upside, steady private sector recovery and further broadening of growth, the start of operations at the Dangote refinery and decisive steps to mobilize revenues, in line with the Strategic Revenue Growth Initiative (SRGI) could spur inclusive growth and development.”
