The World Bank has predicted that Nigeria’s fiscal position will drop further in 2023 as it highlighted high borrowing costs, lower energy prices, slow growth in oil production and subdued oil-sector activity as the major reasons for the drastic drop.
According to the latest Global Economic Prospects report released by the World Bank, Nigeria’s growth weakened to 3.1 percent in 2022 and will further drop to 2.9 percent in 2023.
The World Bank report further added that low oil output, insecurity, petrol subsidies, forex scarcity are other factors that will ensure the fiscal position of the nation to further drop.
“Growth in Nigeria—the region’s largest economy—weakened to 3.1 per cent in 2022, a 0.3percentage point downgrade from the June projection. Oil output dropped to 1 million barrels per day, down by over 40 per cent compared to its 2019 level, reflecting technical problems, insecurity, rising production costs, theft, lack of payment discipline in joint ventures, and persistent underinvestment, partly because of the diversion of oil revenues to petrol subsidies, estimated at over 2 per cent of GDP in 2022 (NEITI 2022; World Bank 2022t).
“A strong recovery in non-oil sectors moderated in the second half of the year as floods and surging consumer prices (annual inflation surpassed 21 per cent for the first time in 17 years) disrupted activity and depressed consumer demand. Persistent fuel and foreign exchange shortages, with the naira depreciating by over 30 per cent last year in the parallel market, further dampened economic activity.”
The report further predicted that Nigeria will experience the same drop in 2024 as growth in the oil sector continues to weaken.
The report added, “In Nigeria, growth is projected to decelerate to 2.9 percent in 2023 and remain at that pace in 2024—barely above population growth. A growth momentum in the non-oil sector is likely to be restrained by continued weakness in the oil sector. Existing production and security challenges, and a moderation in oil prices are expected to hinder a recovery in oil output.”
Earlier, the World Bank had warned the Federal Government that 62 percent of its revenue by 2027 will be used to pay interest on loans borrowed.