The International Monetary Fund (IMF) has cut Nigeria’s economic growth projection for this year by 0.2 percent. The Washington-based financial institution reduced the projection from 3.4 percent it had last July to 3.2 percent.
The report, which was disclosed on Tuesday in its World Economic Outlook (WEO) for October, also downgraded the economic growth projection for sub-Saharan Africa from 3.8 percent to 3.6 percent for this month, citing tighter financial and monetary conditions.
“In sub-Saharan Africa, the growth outlook is slightly weaker than predicted in July, with a decline from 4.7 percent in 2021 to 3.6 percent and 3.7 percent in 2022 and 2023, respectively — downward revisions of 0.2 percentage points and 0.3 percentage points, respectively.
“This weaker outlook reflects lower trading partner growth, tighter financial and monetary conditions, and a negative shift in the commodity terms of trade”, the report indicated.
The Managing Director, Financial Derivatives Company Limited, Bismarck Rewane said that, out of the many conspicuous macroeconomic issues plaguing the Nigerian economy, the depreciation of the Naira in the foreign exchange market has become the focus of all economic agents (government, investors, business owners, and consumers).
“The main issue for the apex bank is the lack of forex. And with Brent dipping below $85 per barrel, the Federal Government’s revenue woes are bound to get worse and the Central Bank’s hope of achieving price and exchange rate stability before the 2023 elections may be far-fetched”, he said.
IMF said that energy and food crises, coupled with extreme summer temperatures, starkly remind it of what an uncontrolled climate transition would look like.
Much action is needed to implement climate policies that will ward off catastrophic climate change, he said.
Unlike sub-Saharan Africa, the report projected that growth in the Middle East and Central Asia would increase to 5.0 percent.
According to the IMF, the development reflects “a favourable outlook for the region’s oil exporters and an unexpectedly mild impact of the war in Ukraine on the Caucasus and Central Asia”.
“In 2023, growth in the region is set to moderate to 3.6 percent as oil prices decline and the headwinds from the global slowdown and the war in Ukraine take hold”, it added.
The IMF urged policymakers to keep a steady hand as the global economy continues to face steep challenges, shaped by the lingering effects of three powerful forces – the Russian invasion of Ukraine, a cost-of-living crisis caused by persistent and broadening national pressures, and the slowdown in China.
Its latest forecasts project global growth to remain unchanged in 2022 at 3.2 percent and to slow to 2.7 percent in 2023—0.2 percentage points lower than the July forecast—with a 25 percent probability that it could fall below two per cent.
It said: “More than a third of the global economy will contract this year or next, while the three largest economies—the United States, the European Union, and China—will continue to stall. In short, the worst is yet to come, and for many people 2023 will feel like a recession.
“Downside risks to the outlook remain elevated, while policy trade-offs to address the cost-of-living crisis have become acutely challenging. The risk of monetary, fiscal, or financial policy miscalibration has risen sharply at a time when the world economy remains historically fragile and nancial markets are showing signs of stress”.
It added that global tightening financing conditions could trigger widespread emerging market debt distress.
“Increasing price pressures remain the most immediate threat to current and future prosperity by squeezing real incomes and undermining macroeconomic stability. Central banks around the world are now laser-focused on restoring price stability, and the pace of tightening has accelerated sharply. There are risks of both under- and over-tightening,” it said.
The Fund called for formulating the appropriate fiscal policy, given the juxtaposed cost-of-living, energy, and food crises has become an acute challenge for many countries.
The Fund said: “For many emerging markets, the strength of the dollar is causing acute challenges, tightening financial conditions, and increasing the cost of imported goods. The dollar is now at its highest level since the early 2000s”.
