IMF Downgrades Nigeria’s Growth, Forecasts 23% Inflation

The International Monetary Fund (IMF) has revised downwards its growth projections for Nigeria for 2024 to 3.0 per cent from 3.1 per cent which it earlier projected even as it projected the country’s inflation rate at 23 per cent this year and 15.5 per cent by next year.

Responding to LEADERSHIP at the World Economic Outlook launch press conference yesterday, IMFs division chief, Research Department, Daniel Leigh, noted that addressing inflation is critical for Nigeria, saying the “perspective we have is that bringing down inflation is top priority and the Central Bank of Nigeria has already raised interest rates significantly over the past year to 18.8 per cent.

“There were reforms and the currency depreciated. And some of this weakness in the naira has contributed to the increase in inflation. Now, there’s also structural factors behind that high inflation, including the fiscal side financing of the deficit. This is clearly creating hardship.

“The monetary tightening is helping in our forecast to bring inflation down from 24.6 per cent in 2023 to 23 per cent this year and then closer to single digits into 2025 at 15.5 per cent. But on top of conquering inflation to monetary tightening, there is also a need to provide social support through the budget, and creating the space for that is the challenge.”

Commenting on Nigeria’s growth rate, chief economist and director, Research Department, IMF, Pierre-Olivier Gourinchas said: “On Nigeria’s growth rate, we have a slight downward revision for 2024, at 3 per cent which is a -0.1 per cent.

“Next year is unchanged at 3.1 percent and the impact of Mali, Niger and Burkina Faso leaving ECOWAS is something that we are monitoring and we are taking note. It’s a bit early to assess what the impact is going to be but, of course, we assess that in general. Having an integrated economic area is something that is going to be favourable and conducive to trade and conducive to higher growth, and sort of moving away from this is going to have the opposite effect.”

Also speaking on the downgrade, Leigh said: “We also do have a forecast for Nigeria that we downgraded slightly, and that mainly reflects a lower than expected outcome in 2023. In the context of the monetary tightening to reduce inflation and mainly the external shocks, in terms of high borrowing costs, and that constrains domestic investment and spending.”

The IMF, in its World Economic Outlook launched yesterday, said it reviewed upwards Sub-Sahara Africa projections from 3.3 per cent in 2023 to 3.8 per cent in 2024 and 4.1 per cent in 2025 as it envisages a soft landing for the global economy.