IMF Cuts Nigeria’s Growth Forecast to 3.2% for 2022

The International Monetary Fund (IMF) has lowered Nigeria’s growth projection from the initial 3.4% to 3.2% for the 2022 fiscal year.

The Fund attributed the reduction to Nigeria’s limited fiscal space for external shock, rising cost of living as inflation jumped above 20% in the month of August, political unrest ahead of 2023 presidential elections, weak economic fundamentals and a host of other factors.

Nigeria’s National Petroleum Corporation Limited on Monday announced it had agreed on a 90-day delayed payment term with local importers of gasoline due to the drop in revenue generation from the nation’s record low crude oil production.

As a mono-product economy that depends on crude oil for over 90% of its foreign revenue, drop in crude oil production from over 2.1 million barrels per day to about 1 million barrels per day at a time when crude oil prices are trading at a record high has limited Nigeria’s ability to fund capital projects and increase borrowing. A situation IMF and the World Bank said must be checked to avoid further catastrophe.

The adjustment in growth projection was to accommodate changes in Nigeria’s economic reality following a previous robust prediction of 3.4% in July, up from 3.3% in April.

According to the institution’s World Economic Outlook (WEO) for October 2022 titled, “Countering the Cost-of-Living Crisis”, Sub-Saharan Africa will experience a downgraded economic growth from 3.8% to 3.6%.

IMF noted that this reduced economic projection is a result of tighter financial and monetary conditions. 

Investors King learnt that the financial institution also cut global growth projection to 3.2% in 2022 and 2.7% in 2023.

Save from the global financial crisis of 2007/08 and the economic impacts of the Covid 19 pandemic, this global projection is the lowest since 2001. 

However, the report projected that growth in the Middle East and Central Asia would increase to 5.0% in 2022.

According to the IMF, the growth in the middle east is a reflection of a favourable outlook for the region’s oil exporters.

The IMF further projected that about one-third of the world economy will face two consecutive quarters of negative growth while global inflation could rise from 4.7% in 2021 to as high as 8.8% in 2022. 

Inflation could, however, decline to 6.5% in 2023 and further to 4.1 per cent by 2024. 

In a probable worst-case scenario, the IMF expects global inflation to pick at 9.5% before decelerating to 4.1% by 2024.

The report however warned that inflation could yet again prove more persistent, especially if labour markets remain extremely tight, while a further escalation of the raging war in Ukraine could exacerbate the energy crisis.

Conclusively, the financial institution advised central banks to keep a steady hand with monetary policy firmly focused on taming inflation and complement it with fiscal response to the rising cost of living and energy crisis which has also become a serious challenge for many countries.