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IMF: Nigeria’s 2024 Growth Outlook Revised Upward – Coronation Economic Note

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IMF - Investors King

In its latest World Economic Outlook (WEO), the IMF revised its global growth forecast for 2024 upward to 3.2% y/y from 3.1% y/y projected in its January ’24 WEO.

Meanwhile, the growth outlook for 2025 was unchanged at 3.2% y/y. It is worth highlighting that global growth projections for 2024 and 2025 remain below the historical (2000-2019) average of 3.8%.

Persistence inflationary pressure, turbulence in China’s property sector, ongoing geopolitical tensions, and financial stress continue to pose downside risk to global growth projection.

There was an upward growth revision for United States to 2.7% y/y from 2.1% y/y. The upward revision can be partly attributed to a stronger than expected growth in the US economy in Q4 ‘23 bolstered by healthier consumption patterns; stronger momentum is expected in 2024.

Growth in China remains steady at 4.6% y/y. This is consistent with the projection recorded in its January ’24 WEO, as post pandemic boost to consumption and fiscal stimulus eases off amid headwinds in the property sector. We expect a loosening or a hold stance in the near-term as China continues to seek ways to bolster its economy.

On the flip side, GDP growth was revised downward (marginally) for the Eurozone to 0.8% y/y from 0.9% y/y (in its January ’23 WEO) for 2024. The growth projection for the United Kingdom was also revised downwards to 0.5% y/y from 0.6% y/y.

Russia’s growth forecast was revised upward to 3.2% y/y from 2.6% y/y (in its January ’24 WEO) for 2024. This revision was largely due to high investment and robust private consumption supported by wage growth.

The projection for average global inflation was revised upward to 5.9% y/y for 2024 from 5.8% y/y (in its January ’24 WEO), with an expectation of a decline to 4.5% y/y in 2025.

This is reflective of the cooling effects of monetary policy tightening across advanced and emerging economies.

Based on IMF projections, we anticipate a swifter decline in headline inflation rates averaging near 2% in 2025 among advanced economies before the avg. inflation figure for developing economies returns to pre-pandemic rate of c.5%.

This is driven by tight monetary policies, softening labor markets, and the fading passthrough effects from earlier declines in relative prices, notably energy prices.

We understand that moderations in headline inflation have prompted central banks of select economies to slow down on further policy rate hikes.

For instance, the US Federal Reserve may consider rate cuts three times this year if macro-indicators align with expectations. Also, the UK and ECB are likely to reduce their level of policy restriction if they become more confident that inflation is moving towards the 2% target.

The growth forecast for sub-Saharan Africa remains steady at 3.8% y/y for 2024. The unchanged projection can be partly attributed to expectations around growth dynamics in Angola, notably contraction in its oil sector, which was offset by an upward revision for Nigeria’s GDP growth estimate.

For Nigeria, IMF revised its 2024 growth forecast upward to 3.3% y/y from 3.0% y/y (in its January ’24 WEO). This revision partly reflects the elevated oil price environment. Bonny Light has increased by 14.6% from the start of the year to USD89.3/b (as at April 2024).

Other upside risks include relatively stable growth in select sectors, improved fx market dynamics as well as ongoing restrictive monetary stance by the CBN.

Nigeria’s headline inflation has steadily recorded upticks (currently at 33.2% y/y as of March ‘24). Our end-year inflation forecast (base-case scenario) is 35.8% y/y. The ongoing geopolitical tension could exacerbate supply chain disruptions, driving commodity prices, and exerting pressure on purchasing
power.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

African Economy Set for Steady Growth: 4% Projected for 2025

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Nigerian Breweries - Investors King

Experts are forecasting a robust growth trajectory of 4% for the continent in 2025.

This optimistic projection was highlighted during the ongoing Afreximbank annual meetings, incorporating the Africaribbean Trade and Investment Forum, held recently in Nassau, The Bahamas.

Yemi Kale, Group Chief Economist and Managing Director of Research and International Cooperation at Afreximbank, presented the 2024 African Trade Report and Economic Outlook, saying the African Continental Free Trade Area (AfCFTA) is significant in driving economic integration and growth.

The projected growth rate of 4% for 2025 reflects a steady recovery path for Africa, building on the expected 3.5% growth anticipated for 2024.

This positive outlook comes at a crucial time when African economies are navigating challenges posed by global economic dynamics, including inflationary pressures and supply chain disruptions.

Kale underscored the resilience of intra-African trade, which expanded by 3.2% in 2023 despite a 6.3% overall contraction in Africa’s trade volumes.

This resilience is a testament to the AfCFTA’s potential to bolster regional trade ties and reduce dependency on external markets.

The Afreximbank report also delved into macroeconomic environments, trade patterns, and sovereign debt sustainability dynamics, providing policymakers and business leaders with actionable insights to navigate complexities in global markets effectively.

Nomusa Dube-Ncube, Premier of Kwazulu-Natal, highlighted Africa’s modest share of global GDP and manufacturing output, emphasizing the untapped potential within intra-African trade.

She noted that while Africa currently accounts for only 3% of world trade, intra-regional trade is steadily increasing, indicating a growing economic ecosystem within the continent.

Pamela Coke-Hamilton, Executive Director of the International Trade Centre (ITC), echoed the sentiment, advocating for enhanced trade between Africa and the Caribbean.

The ITC projects trade in goods and services between these regions to reach $1 billion by 2028, underscoring the mutually beneficial opportunities for economic expansion.

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Economy

Nigeria Sees 95% Surge in Food Imports Despite Emergency on Food Production

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Zambian economy

Nigeria’s food import bill has surged to a five-year high in the first quarter of 2024, despite the federal government declaring a state of emergency on food production.

Data from the National Bureau of Statistics (NBS) reveals a 95.28 percent increase in food imports to N920.54 billion from January to March, compared to N471.39 billion in the same period last year.

This alarming rise comes amid soaring food inflation, which hit a record 40.5 percent in April, reflecting a 15.92 percent year-on-year increase.

The sharp inflation has left many Nigerians struggling to afford a balanced diet, exacerbating the food security crisis in Africa’s most populous nation.

In March, President Bola Ahmed Tinubu emphasized the government’s commitment to self-sufficiency in food production, stating that Nigeria would not rely on imports to stabilize prices.

“We will not allow the importation of food but rather turn the lack in the country into abundance,” Tinubu declared. However, the latest import figures suggest that this goal remains elusive.

The NBS Foreign Trade Statistics report highlights that the value of food imports via maritime, air, and land routes surged 29.4 percent from N711.4 billion in the fourth quarter of 2023.

Major agricultural goods imported included durum wheat from Canada and Lithuania, valued at N130.26 billion and N98.63 billion, respectively. Frozen blue whitings from the Netherlands accounted for N16.67 billion.

Wheat imports alone constituted N519.75 billion of the total food import bill. The average cost of wheat imports, a significant driver of the food import value, increased by 33 percent compared to the previous quarter’s value of N391.01 billion.

The rising importation of wheat reflects its popularity among Nigerian consumers amid skyrocketing prices of close substitutes like garri and rice.

Overall, Nigeria’s total imports for Q1 2024 amounted to N12.64 trillion, representing a 39.65 percent increase from N9.05 trillion in Q4 2023 and a 95.53 percent rise from N6.47 trillion in Q1 2023. Food imports accounted for 7.3 percent of total imports during the period under review.

The bulk of Nigeria’s imports came from Asia, China, Europe, America, and Africa. Mineral fuels topped the import category with N4.44 trillion, representing 35.09 percent of total imports.

Machinery and transport equipment followed with N3.17 trillion, contributing 25.08 percent, and chemicals and related products at N1.79 trillion, making up 14.13 percent of total imports.

Despite the federal government’s initiatives to boost local food production and reduce dependency on imports, the latest data underscores the persistent challenges facing Nigeria’s agricultural sector.

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Ethiopia Boosts Spending by 21%, Eyes IMF Program for Economic Relief

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Northern Ethiopia - Investors King

Ethiopia has announced a 21% increase in its 2025 budget, marking the first budget since defaulting on a Eurobond payment and committing to economic reform discussions with the International Monetary Fund (IMF).

The nation’s Finance Minister, Ahmed Shide, revealed the new budget details to lawmakers on Tuesday, outlining plans to spend 971.2 billion birr ($16.9 billion) in the fiscal year starting July 2024.

The increased budget reflects Ethiopia’s commitment to addressing its economic challenges head-on. Despite the heightened expenditure, the fiscal deficit is projected to remain stable at 2.1% of gross domestic product (GDP), unchanged from the current fiscal year.

Financing the Deficit

Minister Shide outlined a plan to cover the 358.5 billion-birr deficit through a combination of local and foreign borrowing.

The domestic borrowing component will be managed via government treasury bills and medium-term bonds. Shide emphasized that until substantial external donor support is secured, Ethiopia will continue to rely heavily on its domestic markets to finance budget deficits.

“While the government has secured some external financing from the World Bank and the European Union, negotiating an IMF program will be crucial to alleviate pressure on local banks and secure overall debt relief,” said Giulia Filocca, a senior analyst at Standard & Poor’s for sovereign and international public finance ratings.

IMF Program and Economic Reforms

An agreement with the IMF is seen as a pivotal step for Ethiopia. The nation failed to remit a $33 million coupon payment for its $1 billion bond in December 2023, leading to agreements with some creditors, including the Paris Club, to suspend debt repayments.

In exchange, Ethiopia is expected to reach a staff-level agreement with the IMF, which will likely include economic reforms such as devaluing the birr currency.

“Our expectation is that an IMF program will be signed this year, but the timeline remains unclear due to ongoing political developments and challenges over foreign-exchange reforms,” added Filocca.

Budget Highlights

The new budget includes 451.3 billion birr for recurrent spending, 283.2 billion birr for capital expenditure, and 236.7 billion birr allocated for regional subsidies.

The government projects income of 612.7 billion birr, with tax revenue expected to contribute 502 billion birr and non-tax income 61.6 billion birr. Sector budget support is anticipated to bring in 7.3 billion birr, with aid and grants expected to add 41.8 billion birr.

Economic Outlook

Ethiopia’s economy is forecasted to expand by 8.4% in the coming fiscal year, up from an expected 7.9% growth rate in the current period. The budget increase is designed to support this growth trajectory by enhancing public investment and stimulating economic activity.

“Our partnership with the IMF and other international financial institutions will be key to ensuring Ethiopia’s economic resilience and sustainable growth,” Minister Shide concluded. “We are committed to implementing the necessary reforms to secure a brighter economic future for our country.”

As Ethiopia navigates its economic challenges, the government’s proactive approach to increasing spending and engaging with the IMF reflects a strategic effort to restore fiscal stability and drive long-term economic development.

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