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1. The Many Faces of Nigeria in 2023: Understanding the Economics of Change
2. Report Summary: 2023 Macro Economic Outlook - The Many Faces of Nigeria in 2023: Understanding the Economics of Change

We project that the Nigerian economy would record a 2.9% growth rate in 2023. The Agricultural sector is expected to grow at 1.97% under the impact of the floods last year as well as insecurity in the farming areas. The industrial sector is expected to continue to contract on the back of rising interest rates, higher electricity costs, and new import duties proposed in the Finance Bill. The Services would continue to make the largest contribution to the country’s GDP although growth in the Telecoms sector would be moderated by the new duties contained in the 2022 finance bill.  In terms of the policy environment, Analysts say that Federal Government’s actual deficits would exceed 5% of the budget despite the performance on VAT, Customs collections as well as Corporate Income Tax (CIT). Despite the expectation that global commodity prices would moderate in 2023, we believe Inflation would remain high under the impact of the phased removal of fuel subsidy planned to commence in April, the increase in electricity tariffs, and the further depreciation in the naira. The commencement of operations at the Dangote refineries and improved crude oil production could support the FX reserves marginally, although gains could be counteracted if NNPC remittances to the reserves do not improve.  Meanwhile, the Monetary Policy Rate (MPR) is expected to reach 18% by year-end as the MPC continues to tamp down rising inflation, but real returns would remain negative.

In a population census year with an estimated population of over 200million people as of 2022 and about 70% below 45 years in age, the strategic architecture of statecraft and economic management would be critical in shaping the future. We believe the census would be more meaningful if conducted by the new administration as planning and economic tools and not political tool. Additionally, we expect the lack of advanced technologies to weaken the integrity of the 2023 census. The shortest distance between government and the citizens is integrity and technology is an enabler for validating the integrity. 

Key Highlights

• 2023 GDP growth forecast: 2.9% (as against 3.0% in 2022).
• Driven by growth in the service sector, namely, information and communications, trade, and financial & insurance services.
• Post-election conflict
• The launch of the Dangote Refinery by H1 2023 is another uptick in risk drivers.
• Nevertheless, we forecast an end-2023 Parallel market rate of N765/US$.

Drivers

• Potential downside risks from weak global growth on the Nigerian Economy.
• Currencies of Emerging Markets are likely to see further depreciation due to monetary tightening in advanced economies, especially in H1 2023.
• Other risks include concerns around capital inflows, debt sustainability concerns, and additional pressure on fx and reserves.
• Q4 2022 GDP likely dropped from the recent flooding and its knock-on effects.
• CBN’s more hawkish stance constitutes downside risks to growth.
• The risk of social unrest post-elections and industrial actions post-removal of fuel subsidies could also affect the outcomes for 2023.

Table 8: Domestic Economic Forecasts

Table 9:  Global Economic Forecasts