Nigeria’s economy projected to grow 3.2% in 2023

Nigeria’s economy has been projected to grow by +3.2 percent year-on-year (y/y) in the 2023 fiscal year.

This projection is based on a positive forecast in the oil sector with a favourable base effects and higher crude oil production of 1.53mb/d against the 1.37m b/d production of 2022E. Similarly, it is expected that the non-oil sector will remain positive with a +2.45 percent y/y performance.

However, it is expected that the sector will weaken when compared to 2022 based on the current Central Bank of Nigeria (CBN) tighter credit conditions; flood-induced slower growth pace of the agriculture GDP; elevated inflationary pressures and spill over impact of the global slowdown.

Opeoluwa Oluwa, associate, research and strategy, Cordros Securities Ltd, said that the service sector supported the ICT, finance and insurance, trade, real estate and transportation sub-sectors with projected GDP of +3.36 percent y/y.

According to Oluwa, the manufacturing sector will slow down on the back of the high interest rates and currency pressures with a projected +1.94 percent y/y GDP. However, it is expected that the agriculture sector will be dampened by unprecedented extreme weather conditions with a projected +1.70 percent y/y GDP.

Cordros also expects the fiscal deficit to widen on the back of a higher revenue shortfall of the government. The Federal Government of Nigeria (FGN’s) 2023 aggregate revenue of N7.84 trillion is 25.3 percent below its estimated revenue of N10.49 trillion.

Similarly, the FGN’s oil revenue estimate of N1.25 trillion is 43.9 percent lower than the government’s assumption of N2.23 trillion but 95.4 percent y/y higher than 2022E (N640.05 billion).

“The one thing we do acknowledge is that it is likely we’re going to start to see deregulation in the downstream oil and gas sector because it is one thing that you can immediately change that can improve your overall fiscal condition, because if we are spending three trillion on subsidy; a reduction in half is very, very meaningful. And that can allow you to start to do some things in certain areas that means that even without a significant overhaul, the economic condition will improve.

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“If you unlock N1.5 trillion and it goes towards debt management or for investments in education, healthcare that has significant economic impact without overhauling everything. We believe that any new government is going to likely have to maintain the status quo for a while before we see any significant change,” said Jolomi Odonghanro, head, research & strategy, Cordros Securities Ltd.