Nigeria’s growth momentum has been affected by macroeconomic issues such as the naira redesign, foreign exchange shortages and the persistently high inflation rate, the World Bank has said.
The bank, in its global economic prospects for Sub-Saharan Africa (SSA) report for June 2023, said these issues and the dampened growth were also experienced in Angola and South Africa. According to the global body, growth in these three countries, which are the largest SSA economies, slowed to 2.8 percent in 2022.
It added that the fragile and incomplete recoveries from earlier adverse economic and climate shocks in many countries have been weakened by high and persistent inflation, further tightening of global financial conditions, domestic policy tightening, and flare ups of violence and social unrest in some countries
“The post-pandemic rebound in Nigeria’s non-oil sector cooled earlier this year because of persistently high inflation, foreign exchange shortages, and shortages of banknotes caused by currency redesign,” it stated.
In addition, it said the growth momentum was further stalled amid lower energy prices and stagnant oil production.
The bank said growth in SSA was expected to decline further to 3.2 percent in 2023 before picking up to 3.9 percent in 2024.
“Growth in Nigeria is expected to remain barely above the population growth—far slower than needed to make significant inroads into mitigating extreme poverty,” it added.
For the three largest economies in SSA, the bank said the average per capita income growth in 2023-2024 was not expected to exceed 0.5 percent; hence prospects for poverty reduction in the region remain bleak, with almost 40 percent of SSA’s population living in countries with lower per capita incomes next year than in 2019.
In addition, the World Bank said the outlook downgrades extend beyond the major regional economies with elevated cost of living restraining private consumption and tighter policies holding back investment inflow.
“Growth in SSA continued to decelerate earlier this year owing to various country-specific challenges and heightened external economic headwinds; worsened domestic vulnerabilities together with tight global financial conditions and weak global growth are expected to keep recoveries subdued,” it stated.
Ajay Banga, president, World Bank Group said the surest way to reduce poverty and spread prosperity ‘is through employment; however, slower growth makes job creation much harder.’
On a global level, the World Bank stated that growth was projected to decelerate from 3.1 percent in 2022 to 2.1 percent in 2023.
Indermit Gill, chief economist and senior vice president, World Bank Group said, in emerging markets and developing economies, debt pressures were growing due to higher interest rates, adding that fiscal weaknesses have already tipped many low-income countries into debt distress.
“The world economy is in a precarious position, In 2023, trade will grow at less than a third of its pace in the years before the pandemic; the financing needs to achieve the sustainable development goals are far greater than even the most optimistic projections of private investment,” Indermit said.
Similarly, Ayhan Kose, deputy chief economist, World Bank Group said many developing economies were struggling to cope with weak growth, persistently high inflation, and record debt levels amid the possibility of more widespread spillovers from renewed financial stress in advanced economies which could make matters even worse for them.
“Policy makers in these economies should act promptly to prevent financial contagion and reduce near-term domestic vulnerabilities,” Kose said.