Low Oil Output Forces IMF To Revise Nigeria’s Growth

Nigeria’s growth forecast has been revised downward to 2.9 per cent for 2023 before a slight improvement to 3.1 per cent next year due to weaker oil and gas production in the country.

This is the International Monetary Fund (IMF) said the recent reforms of the Tinubu administration may pave the way for stronger and inclusive growth.

Speaking at press conference of the October 2023 World Economic Outlook in Marrakech, the IMF chief economist,  Pierre-Olivier Gourinchas said the growth in Nigeria is projected to decline from 3.3 per cent in 2022 to 2.9 per cent in 2023 and rise to 3.1 per cent in 2024, with negative effects of high inflation on consumption taking hold.

According to the outlook, the Nigerian forecast for 2023 is revised downward by 0.3 percentage point, reflecting weaker oil and gas production than expected, partially as a result of maintenance work.

IMF chief, Daniel Leigh, on his part, said: “For Nigeria, in particular we have a growth forecast that goes from 3.3 per cent this year to 2.9 per cent next year before going up to 3.1 in 2024. “There is a downward revision for this year, partly because of the de-monetization, the high inflation, the shocks to agriculture and hydrocarbon output. That is coming on top of all those external headwinds.

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“We also add that president Tinubu has moved quickly with important reforms, including ending the fuel subsidies and unifying the official exchange rates. We welcome these initial bold reforms because we see them as paving the way toward stronger and inclusive growth.

He warned against premature easing of rates, saying, doing so would open up the economy to increased shocks.

This is contrary to the plan of President Bola Ahmed Tinubu to ease monetary policy.

Whilst the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) could not hold its last meeting scheduled for September 25 and 25, 2023, its stance has in recent times been to continue to tighten.

At the inception of his tenure, President Bola Ahmed Tinubu had stressed that he would work on reducing interest rates in the country, a position some analysts say the newly appointed governor and deputies of the CBN may consider at the next meeting which is expected to hold next month.

However, the IMF, in its Africa: Special Issue launched during the ongoing 2023 Annual Meetings in Marrakech stressed the need for further tightening of monetary policy to address rising inflation.

Speaking at a regional press conference, the IMF African Department director, Abebe Aemro Selassie, stated that maintaining a further increase in benchmark interest rate is aimed at mopping up funds from the rich whilst helping the poor.

Stating that a further tightening is “pro poor”, he said countries that had sustained a hawkish monetary policy had been able to address and halt rising inflation.

The fund also commended President Bola Tinubu for his quick reforms, including ending the fuel subsidies and unifying the official exchange rate.

The IMF urged countries to reduce debt vulnerabilities, while creating space for development spending. This demands a delicate balance between raising revenues and protecting growth, allowing the exchange rate to depreciate where needed, while also working to mitigate some of the follow-on effects of depreciation, including higher inflation and increased debt payments as well as investing in the future to improve living standards—particularly in resource intensive countries where per capita income growth is expected to remain very low.

Reforms needed, it said, include more investment in education, better management of resource-based wealth, improved business climate, digitalization, and greater trade integration.