Thursday, April 21, 2022 / 12:35 PM / by FDC Ltd / Header Image Credit: 

The International Monetary Fund upgraded its projection for Nigeria's economic growth in 2022. This was on the premise that the rise in global oil price will improve the growth prospect of Nigeria in 2022. This is a 0.7% increase from its earlier forecasts (2.7%) in January 2022. It was disclosed in its April edition of World Economic Outlook: War Sets Back the Global Recovery. The multilateral agency also forecasted a 3.1% growth rate in 2023 down from 3.4% in 2022. 

IMF's forecast for Nigeria is lower than the outlook for the SSA region which is expected to grow by 3.8% in 2022. In SSA, food covers a larger share of consumer spending (above 40%). Higher food prices are detrimental to a household's purchasing power and consumer demand, particularly in low-income households. Unfortunately, this is the reality of most Nigerians with a high level of multi-dimensional poverty (above 55%) and high misery index of about 52%. 

Interestingly, the increase in oil prices has projected a positive outlook for the region particularly oil exporting countries like Nigeria and Angola. The major downside risks to the projection is sub-optimal oil production. Nigeria may fail to benefit from this higher oil prices due to sub-optimal production as a result of oil theft and vandalism. This has implications for foreign exchange earnings and government finances in a time of high-interest rate and excruciating debt service burden. Another risk to the forecast is rising food prices which has serious implications on inflation rate in Nigeria and SSA as a whole. 

They projected that the global economy will contract to 3.6% in 2022 from 6.1 % in 2021 as a result of the war on Ukraine, and sanctions on Russia. Beyond 2023, global growth is projected to decline to about 3.3% over the medium term.