Rising oil prices to increase activities in Africa’s largest economy Nigeria and support economic growth at a 3.4% rate in 2022, down from the 3.6% estimated in 2021.
The World Bank stated in its new report titled “Stagflation Risk Rises Amid Sharp Slowdown in Growth”.
According to the leading multilateral financial institution, Nigeria’s economy will grow at 3.2% in 2023 and 2024. This may not be unconnected to the uncertainty associated with emerging economies’ presidential elections as seen since candidates started campaigning for the 2023 general elections.
The Nigerian Naira plunged to N607 against the United States Dollar at the parallel market, popularly known as the black market. While the inflation rate extended further to 16.8% in the month of April to force the Central Bank of Nigeria-led monetary policy committee to raise the interest rate by 150 basis points to 13%.
Partly, that is to ensure capital importation into the economy, especially after data showed a significant drop in capital inflow following rate increase in developed economies. In the first quarter of 2022, Nigeria’s capital importation dropped by 28.09% as reported by Investors King earlier this week. The decline is in line with the usual bearish trend during the election period.
On Sub-Saharan Africa (SSA) growth, the region is expected to grow at a slower pace of 3.7% in 2022 from 4.2% recorded in 2021. This, World Bank said was due to domestic price pressures caused by induced supply disruptions owing to the ongoing war in Ukraine.
Ukraine is one of Africa’s leading food suppliers. However, the ongoing war is expected to impact food affordability and real incomes in the region. While the report noted that limited direct trade and financial linkages with Europe and Central Asia could help curtail some of the negative effects of the war, it noted that “the sharp deceleration of global growth and warrelated shortages of food and fuel are creating substantial headwinds for the region, even more so in countries reliant on wheat imports from Russia and Ukraine (Democratic Republic of Congo, Ethiopia, Madagascar, Tanzania).”
According to the World Bank, the slowdown predicted could lead to a decline in per capita incomes in Sub-Saharan Africa. Therefore, Africa is projected to be the only emerging market and developing economy region that its per capita incomes will not return to their 2019 levels in 2022 and even in 2023.