The growth of Africa’s biggest economy this year is expected to lag that of some of the continent’s smallest nations, an analysis of the 2023 projections by the International Monetary Fund (IMF) shows.
With a combined economy size that is four times less than Nigeria’s real Gross Domestic Product, five of Africa’s smallest nations are expected to grow at a faster pace than Nigeria.
According to the forecast by the IMF published in its World Economic Outlook, Nigeria’s economy is set to expand by 3 percent in 2023, lagging behind Senegal (8.1 percent), the Democratic Republic of Congo (6.7 percent), Côte d’Ivoire (6.5 percent), Uganda (5.9 percent), and Ethiopia (5.3 percent).
On why the economy of Africa’s most populous nation will be crawling behind its smaller peers in 2023, analysts point at inadequate infrastructure, obstacles to investments, lack of growth-driven reforms, foreign exchange volatility, and a harsh business environment.
“Size is not everything. In 2023 and beyond, the ‘big boys’ would do well to learn from the diversification of some of their smaller neighbours,” analysts at The Economist said.
A report by the United States Agency for International Development said Nigeria’s economic growth is also constrained by insufficient electricity generation capacity, which results in a lack of a reliable and affordable supply of power.
BusinessDay’s findings showed that the five small countries –that have been predicted by the Washington-based institution to surpass the 3.7 percent growth projection for sub-Saharan Africa – have one thing in common: non-reliance on oil.
Findings also show that most of the countries have a recent record of prioritising bold policy actions to help mitigate the compounding risks.
“Timely and aggressive monetary policy tightening in countries with acute inflation, and cautious policy tightening in countries where inflationary pressures are low. Coordination with the fiscal policy will further strengthen the levers to ease inflationary pressures,” the African Development Bank Group said.
Jeffrey Sachs, director of the Center for Sustainable Development at Columbia University, said: “African economies are growing and growing consistently in the coming decades.”
“We see a real acceleration of Africa’s sustainable development; Africa is the place to invest,” said Sachs, who is also the United Nations Secretary-General Antonio Guterres’ advocate for sustainable development goals.
Oil-dependent Nigeria is expected to grow by 3 percent in 2023, compared to an actual growth rate of 3.1 percent in 2022; the country’s public debt has grown more than six-fold since 2015, with servicing costs consuming about 80 percent of government income last year.
Read also: Nigeria’s economy slows in 2022 as agric, industry sectors disappoint
From poor crude oil production in 2022 to several big oil companies excluding Nigeria from their 2023 spending plans, the challenges in the country’s oil sector have further intensified the need for increased attention to the non-oil sector, findings have shown.
There is a consensus among development economists and analysts that Africa’s largest economy is due for a new growth driver after several years of gorging itself on petrodollars.
“Nigeria needs to undertake swift and audacious reforms to stop the rapid decline of its economy and the resultant negative impact on its citizens,” a report released by Agora Policy, an Abuja-based policy think tank, said.
Olu Fasan, a visiting fellow in the international relations department of the London School of Economics, highlighted the strong links between economic openness, innovation, productivity, and prosperity.
“Put simply, without innovation, there will be no productivity growth, and without productivity growth, there will be no wage growth and better living standards, and, thus, no prosperity,” Fasan said.
“2023 was not a good year as we had expected; in fact, we went from frying pan to fire because as challenges intensified, we managed to produce but there was poor demand for goods,” Okhai Ehimigbai, a manufacturer and export executive at Aarti Steel, said.
Another strategy Nigeria can adopt is one where investments are channelled towards human capital like education and health, according to analysts.
The amount spent on fuel subsidies would have a better impact if education and health were subsidised. Nigeria is on course to spend about N6 trillion this year on petrol subsidies.
The World Bank is of the view that increased investment in human capital translates to higher economic prosperity.
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