• Thursday, July 18, 2024
businessday logo

BusinessDay

Nigeria’s Purchasing Power Parity to hit $1.85trn by 2029, says IMF

Public debt hurts citizens, says IMF

Nigeria’s economy is expected to rise to at least $1.852 trillion in Purchasing Power Parity terms by 2029, data from the International Monetary Fund has shown.

The Washington-based Fund’s forecast suggests a significant growth trajectory for the country’s currency purchasing power over the next five years.

This prediction comes at a time when Nigeria battles with exchange rate crisis which has seen the naira plummeted against the US dollar at both official market and on the street.

The purchasing power parity (PPP) shows the rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country.

In other words, it implies that a unit of currency should have the same purchasing power across different countries.

Nigeria’s Gross Domestic Product in PPP terms has been on the increase, projected to rise from $1.36 trillion in 2023 to $1.852 trillion in 2029.

But the purchasing power of Nigerians is being hammered by the weak naira and the record high inflation at 33.69% which is expected to decline to 14% also in the next five years.

The IMF data shows a consistent growth trend, with a notable increase of 5.5 percent expected in 2029.

IMF also forecast Nigeria’s share of global GDP based on PPP to reach 0.78 per cent by 2029, indicating a slight increase from 0.77 per cent in 2023.

The steady growth in Nigeria’s PPP brings a glimmer of hope that the country’s economic trajectory is on the path of growth.

Nigeria, the fourth largest economy in Africa, has faced significant challenges in recent years, including a recession in 2020 caused by the COVID-19 pandemic and a decline in oil prices.

However, the data suggests that Nigeria’s economy is gradually expanding, though slowly, and is expected to continue this trend over the next five years.

The country’s share of global GDP has remained relatively stable, fluctuating between 0.775 per cent and 0.778 per cent from 2024 to 2028.

“In PPP terms our GDP was N1.36 trillion, more than two times our real GDP size. A target of $1.85trn in 5 years is not over optimistic if you consider that the projection is for GDP in PPP terms,” a well-informed source said.

The trend of Nigeria’s GDP in PPP terms over the past few years indicates a steady recovery and growth but the country’s real GDP is less than $500 million and is expected to slide further this year.

Based on IMF’s estimates, Nigeria’s GDP in US Dollars declined from $477 billion in 2022, to $375 billion in 2023, it is estimated to drop to $253 billion in 2024.

In 2024, the country’s GDP in PPP terms stood at $1.44tn, increasing to $1.51tn in 2025, and $1.587tn in 2026. The growth continued in 2027, with a GDP (PPP) of $1.67tn, and $1.759tn in 2028.

With this trend, Nigeria could regain its position as Africa’s largest economy, overtaking South Africa.

Bismarck Rewane, the chief executive officer of Financial Derivatives Company has projected that Nigeria could regain its top place as Africa’s biggest economy by 2028 if it sequences its reforms rightly.