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Nigeria Economic Growth to Slow Down to 2.7% in 2023, Forecasts GlobalData

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Decline in oil production, insecurity ahead of 2023 general elections and high inflationary pressure remain the major areas of concern for Nigeria.

Against this backdrop, the real GDP growth of the country is forecast to slow down from 3% in 2022 to 2.7% in 2023, reveals GlobalData, a leading data and analytics company.

GlobalData’s latest report, “Macroeconomic Outlook Report: Nigeria,” reveals that broadening inflationary pressure had triggered a cost-of-living crisis. Inflation rate is projected to further rise to 19.2% in 2023 from 19.1% in 2022. According to the National Bureau of Statistics, Multidimensional Poverty Index Survey (2022), as of 17 November 2022, 133 million people, equivalent to 63% of the nation’s population, were experiencing multidimensional poverty in the country.

Nigeria is categorized as a high-risk nation and ranks 133rd out of 153 nations in GlobalData Country Risk Index (GCRI Q3 2022). The country’s risk score is higher in the parameters of political environment, macroeconomic, social, technological, and environmental risk when compared to the average of Middle East and African nations.

Puja Tiwari, Economic Research Analyst at GlobalData, comments: “Nigeria’s oil output rose to 1.4 billion barrels per day (bpd) in December 2022 from below one bpd in August 2022, according to Nigerian Upstream Petroleum Regulatory Commission. However, it is significantly below what it was last decade ago (above two million bpd). Oil theft and prolonged repair work at Forcados, a key oil terminal which is expected to continue till September 2023, will result in Nigeria’s under production of crude oil in 2023. Meanwhile, the violent attacks on the election commission offices raise questions on the security in the country ahead of elections.”

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According to GlobalData, agriculture, industry and services sectors contributed 23.6%, 32.2% and 44.2%, respectively, to the gross values added (GVA) in 2022. The three sectors are forecast to grow by 12.2%, 14% and 12.2% in 2023, compared to 13%, 14.9% and 12.9%, respectively, in 2022.

In October 2022, the country allocated a budget of NGN20.5 trillion ($51.5 billion) for the 2023 fiscal year, of which more than 60% will be used to finance debt repayments. This will curtail the expenditure on other developmental sectors.

The naira per US dollar depreciated by 8.7% year-on-year on 2 January 2023. Furthermore, GlobalData estimates the exchange rate to depreciate to NGN420.6 per $ in 2023 from 415.3 per $ in 2022. Nigeria’s foreign exchange (forex) remained depressed amid the dwindling crude oil production and lower exports revenue.

Tiwari concludes: “Introducing measures to reduce poverty as well as monetary measures to curb the mounting prices continue to be the need of the hour for the Nigerian economy. Moreover, the government also needs to work towards policies to control rising gross debt, depreciating currency, and increasing unemployment to reactivate the economy.”

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Economy

IMF Report: Nigeria’s Inflation to Dip to 26.3% in 2024, Growth Expected at 3.3%

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Nigeria’s economic outlook for 2024 appears cautiously optimistic with projections indicating a potential decrease in the country’s inflation rate alongside moderate economic growth.

The IMF’s revised Global Economic Outlook for 2024 highlights key forecasts for Nigeria’s economic landscape and gave insights into both inflationary trends and GDP expansion.

According to the IMF report, Nigeria’s inflation rate is projected to decline to 26.3% by the end of 2024.

This projection aligns with expectations of a gradual easing of inflationary pressures within the country, although challenges such as fuel subsidy removal and exchange rate fluctuations continue to pose significant hurdles to price stability.

In tandem with the inflation forecast, the IMF also predicts a modest economic growth rate of 3.3% for Nigeria in 2024.

This growth projection reflects a cautious optimism regarding the country’s economic recovery and resilience in the face of various internal and external challenges.

Despite the ongoing efforts to stabilize the foreign exchange market and address macroeconomic imbalances, the IMF underscores the need for continued policy reforms and prudent fiscal management to sustain growth momentum.

The IMF report provides valuable insights into Nigeria’s economic trajectory, offering policymakers, investors, and stakeholders a comprehensive understanding of the country’s macroeconomic dynamics.

While the projected decline in inflation and modest growth outlook offer reasons for cautious optimism, it remains essential for Nigerian authorities to remain vigilant and proactive in addressing underlying structural vulnerabilities and promoting inclusive economic development.

As the country navigates through a challenging economic landscape, concerted efforts towards policy coordination, investment promotion, and structural reforms will be crucial in unlocking Nigeria’s full growth potential and fostering long-term prosperity.

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South Africa’s March Inflation Hits Two-Month Low Amid Economic Uncertainty

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South Africa’s inflation rate declined to a two-month low, according to data released by Statistics South Africa.

Consumer prices rose by 5.3% year-on-year, down from 5.6% in February. While this decline may initially suggest a positive trend, analysts caution against premature optimism due to various economic factors at play.

The weakening of the South African rand against the dollar, coupled with drought conditions affecting staple crops like white corn and geopolitical tensions in the Middle East leading to rising oil prices, poses significant challenges.

These factors are expected to keep inflation relatively high and stubborn in the coming months, making policymakers hesitant to adjust borrowing costs.

Lesetja Kganyago, Governor of the South African Reserve Bank, reiterated the bank’s cautious stance on inflation pressures.

Despite the recent easing, inflation has consistently remained above the midpoint of the central bank’s target range of 3-6% since May 2021. Consequently, the bank has maintained the benchmark interest rate at 8.25% for nearly a year, aiming to anchor inflation expectations.

While some traders speculate on potential interest rate hikes, forward-rate agreements indicate a low likelihood of such a move at the upcoming monetary policy committee meeting.

The yield on 10-year bonds also saw a marginal decline following the release of the inflation data.

March’s inflation decline was mainly attributed to lower prices in miscellaneous goods and services, education, health, and housing and utilities.

However, core inflation, which excludes volatile food and energy costs, remained relatively steady at 4.9%.

Overall, South Africa’s inflation trajectory underscores the delicate balance between economic recovery and inflation containment amid ongoing global uncertainties.

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Discontent Among Electricity Consumers as Band A Prioritization Leads to Supply Shortages

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In Nigeria, discontent among electricity consumers is brewing as Band A prioritization by distribution companies (DisCos) exacerbates supply shortages for consumers in lower tariff bands.

The move follows the Nigerian Electricity Regulatory Commission’s (NERC) decision to increase tariffs for customers in Band A, prompting DisCos to focus on meeting the needs of Band A customers to avoid sanctions.

Band A customers, who typically receive 20 to 24 hours of electricity supply daily, are now benefiting at the expense of consumers in Bands C, D, and E, who experience significant reductions in power supply.

The situation has ignited frustration among these consumers, who feel marginalized and neglected by DisCos.

Daily Trust investigations reveal that many consumers in lower tariff bands are experiencing prolonged power outages, despite their expectations of a minimum supply duration.

Residents like Christy Emmanuel from Lugbe, Abuja, and Damilola Akanbi from Life Camp are lamenting receiving less than the promised hours of electricity, rendering it ineffective for their daily needs.

Adding to the challenge is the low electricity generation, forcing DisCos to ration power across the grid.

As of recent records, only 3,265 megawatts were available, leading to further difficulties in meeting the demands of all consumers.

The prioritization of Band A customers has been confirmed by officials from DisCos, citing directives from the government to avoid sanctions from NERC.

An anonymous official from the Kaduna Electricity Distribution Company highlighted the pressure from the government to ensure Band A customers receive the required supply, even if it means neglecting other bands.

Meanwhile, the Transmission Company of Nigeria (TCN) has denied reports blaming it for power shortages to Band A customers. General Manager Ndidi Mbah clarified that recent outages were due to technical faults and adverse weather conditions, outside of TCN’s control.

Experts have criticized the DisCos’ prioritization strategy, arguing that it neglects the needs of consumers in lower tariff bands. Bode Fadipe, CEO of Sage Consulting & Communications, emphasized that DisCos cannot ignore the financial contributions from these bands, which sustain the sector.

Chinedu Amah, founder of Spark Nigeria, urged for optimized supply across all bands, emphasizing the importance of improving service levels for all consumers.

As discontent grows among electricity consumers, calls for fair distribution of power and equitable treatment from DisCos are gaining momentum.

The situation underscores the need for regulatory intervention to address the concerns of all stakeholders and ensure a balanced approach to electricity distribution in Nigeria

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