IMF Predicts Nigeria’s Economic Growth to Slow Down in 2024
The International Monetary Fund (IMF) has projected that Nigeria’s economic growth will decline from 3.2 percent in 2023 to 3.0 percent in 2024.
The IMF retained Nigeria’s 3.2 percent economic growth projection for 2023 in its recent world economic outlook update.
In its ‘World Economic Outlook: A Rocky Recovery (2023 Apr)’ report, released on Tuesday, the IMF improved the country’s 2024 economic growth projection to 3.0 percent from the 2.9 percent it had earlier stated in its January update. The report also indicated that Nigeria’s economy grew by 3.3 percent in 2022.
The IMF noted that the economic prospect of emerging markets and developing economies is on average stronger than those of advanced economies, although these prospects vary.
The Washington-based lender projected that on average, growth is expected to be 3.9 percent in 2023 and rise to 4.2 percent in 2024.
However, the IMF cautioned that debt levels remain high, limiting the ability of fiscal policymakers to respond to new challenges. It also noted that the current uncertainty in the financial sector poses risks to the global economy.
The World Bank Group President, David Malpass, also predicted that global economic growth would slow to two percent from 3.1 percent in 2022. During his opening address at the ongoing Spring Meetings 2023 Media Call, he cited oil prices above $80 per barrel, recent banking sector stress, and persisting inflation pressures as causes of concern.
The combination of weak investment, higher interest rates, and relatively weak growth in advanced economies could lead to slow growth for years, increasing the fiscal stress and debt problems for many developing countries, according to Malpass.
Nigeria’s Economy Grows at Slower Pace in Q1 2023 as Cash Crunch Weighs on Productivity
The Nigerian economy grew at a 2.31% pace in real terms in the first quarter (Q1) 2023, according to the latest report from the National Bureau of Statistics (NBS). This represents a 0.8% year-on-year decline when compared to the 3.11% recorded in the first quarter of 2022.
The bureau attributed the decline to the impact of cash crunch experienced across the nation during the quarter under review.
However, growth was driven mainly by the Services sector, which recorded a growth of 4.35% and contributed 57.29% to the aggregate Gross Domestic Product (GDP).
The agriculture sector contracted by -0.90%, below the 3.16% growth recorded in the first quarter of 2022. Although the growth of the industry sector improved to 0.31% relative to – 6.81% recorded in the first quarter of 2022, agriculture, and the industry sectors contributed less to the aggregate GDP in the quarter under review compared to the first quarter of 2022.
In the first quarter, aggregate GDP stood at N51,242,151.21 million in nominal terms, higher when compared to the first quarter of 2022 which recorded aggregate GDP of N45,317,823.33 million, indicating a year-on-year nominal growth of 13.07%.
The Nigerian Oil Sector
Nigeria was pumping crude oil at 1.51 million barrels per day (mbpd) in the first quarter, higher than the 1.49mbpd recorded in the first quarter of 2022 and 0.17mbpd higher than 1.34mbpd pumped in the fourth quarter of 2022.
The sector contracted by 4.21% (year-on-year) in Q1 2023, indicating an increase of 21.83% points relative to the -26.04% recorded in the corresponding quarter of 2022 while growth in the sector rose by 9.18% points when compared to –13.38% filled in the final quarter of 2022. On a quarterly basis, the oil sector recorded a growth rate of 20.68% in Q1 2023.
The sector contributed 6.21% to the total real GDP in the quarter under review, down from 6.63% and 4.34% recorded in the first quarter of 2022 and up from the preceding quarter respectively.
The Nigerian Non-Oil Sector
According to the report, the non-oil sector expanded by 2.77% in real terms in Q1 2023. Representing a decline of 3.30% from the same quarter of 2022 and 1.67% points lower than the final quarter of 2022.
The non-oil sector was driven in the first quarter of 2023 mainly by Information and Communication (Telecommunication); Financial and Insurance (Financial Institutions); Trade; Manufacturing (Food, Beverage & Tobacco); Construction; and Transportation & Storage (Road Transport), accounting for positive GDP growth.
In real terms, the non-oil sector contributed 93.79% to the nation’s GDP in the first quarter of 2023, higher than the share recorded in the first quarter of 2022 which was 93.37% and lower than the fourth quarter of 2022 recorded as
German Economy Plunges Into Recession as Household Spending Succumbed to Inflationary Pressure
Europe’s largest economy, Germany has plunged into recession as inflationary pressure eroded consumer spending and household income.
The economy contracted by 0.3% in the first quarter of the year following a 0.5% decline recorded in the final quarter of 2022. An economy is said to be in recession if it contracted for two successive quarters.
German economic GDP data showed “surprisingly negative signals,” said Finance Minister Christian Lindner on Thursday. Comparing Germany with other developed economies, the minister said the economy was losing potential for growth.
“I don’t want Germany to play in a league in which we have to relegate ourselves to the last positions,” he said, referring to the forecasts of the International Monetary Fund, which predicted a recession in 2023 only in Germany and Britain among European countries.
However, Robert Habeck, Germany’s economy minister, had attributed the slowdown in growth to the previous exposure to Russia’s energy supply and the decision to cut supply following the breakout of war in Ukraine.
“We’re fighting our way out of this crisis,” Habeck said at an event in Berlin on Thursday.
“Under the weight of immense inflation, the German consumer has fallen to his knees, dragging the entire economy down with him,” said Andreas Scheuerle, an analyst at DekaBank.
Data revealed by Investors King showed German household consumption declined by 1.2% quarter on quarter after price, seasonal and calendar adjustments. While government spending also contracted substantially by 4.9% in the quarter.
“The warm winter weather, a rebound in industrial activity, helped by the Chinese reopening, and an easing of supply chain frictions were not enough to get the economy out of the recessionary danger zone,” ING global head of macro Carsten Brzeski said.
By contrast, investment was up in the first three months of the year, following a weak second half of 2022. Investment in machinery and equipment increased by 3.2% compared with the previous quarter, while investment in construction went up 3.9% on quarter.
There were also positive contributions from trade. Exports rose 0.4%, while imports fell 0.9%.
“The massive rise in energy prices took its toll in the winter half-year,” Commerzbank chief economist Joerg Kraemer said.
A recession could not be avoided and now the question is whether there will be any recovery in the second half of the year.
“Looking beyond the first quarter, the optimism at the start of the year seems to have given way to more of a sense of reality,” Brzeski said.
Power Crisis Looms: South Africa Braces for Record-Breaking Winter Blackouts
As winter descends upon South Africa, the nation finds itself on the precipice of an unprecedented power crisis. Eskom Holdings SOC Ltd., the state electricity company, is struggling to meet the surging demand, and the country is bracing for an alarming wave of record-breaking blackouts.
With 3,000 megawatts less capacity than the previous year, Eskom’s acting CEO, Calib Cassim, delivered a sobering message to reporters: South Africa is heading into a “difficult winter.” In a worst-case scenario, the utility may be forced to implement loadshedding on a massive scale, cutting a staggering 8,000 megawatts from the electricity grid. This would translate into 16 hours of outages during a 32-hour cycle, pushing the nation’s resilience to the brink.
Already burdened by power rationing, South Africa has experienced its most severe bout of outages in recent memory. Eskom’s inability to keep up with demand, largely due to aging and poorly maintained power plants, has dealt a blow to the nation’s economic growth rate. The central bank estimates that the power crisis will shave off a substantial 2 percentage points from South Africa’s already struggling economy this year.
The consequences of the ongoing blackouts extend beyond the economic sphere, as investor sentiment takes a hit. The South African rand, the national currency, has witnessed a sharp decline of 12% this year, marking it as the worst-performing major currency among those monitored by Bloomberg. This stark decline sets South Africa apart from its emerging-market peers, who have managed to make strides against the US dollar.
Analysts are sounding the alarm, with headlines dominated by the intensification of loadshedding and its grim implications for the country. Although South Africa has implemented several measures to stabilize the power supply, progress has been limited. President Cyril Ramaphosa’s plans to expand the procurement of renewable energy have been hindered by a lack of grid capacity, hampering efforts to transition to cleaner and more sustainable sources.
In a bid to address the crisis, Ramaphosa appointed Kgosientsho Ramokgopa as the electricity minister. However, the absence of clearly defined powers has impeded his ability to effectively resolve the dire situation, leaving South Africa in a precarious position.
Eskom’s recent efforts to improve its performance have been plagued by setbacks. Maintenance at the Koeberg nuclear facility has fallen behind schedule, and repairs are required at the Kusile coal-fired plant. The energy availability factor, a crucial metric that measures usable generation capacity, has plummeted to 52%, well below the targeted 60%, according to Cassim.
Adding to Eskom’s woes, former CEO Andre de Ruyter’s memoir has exposed dysfunctionality within the company’s plants, instances of improper conduct by officials, and persistent political interference. These revelations have further eroded trust and cast a shadow of uncertainty over Eskom’s ability to navigate the power crisis.
Crime and sabotage have compounded the challenges faced by Eskom. Incidents are under investigation, diverting attention and resources away from essential plant operations. Eskom emphasizes the need to concentrate on running the facilities efficiently and calls on the public to reduce electricity consumption, especially during peak periods.
South Africa finds itself at a critical juncture as it confronts an imminent power crisis of unprecedented magnitude. The outcome of this challenge will determine the nation’s economic stability, investor confidence, and its ability to secure a sustainable energy future. As winter approaches, the need for swift and effective solutions has never been more urgent. Failure to address this crisis could plunge South Africa into darkness, both literally and metaphorically.
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