Nigeria’s projected GDP growth for 2022 has been lowered by the International Monetary Fund (IMF) from 3.4% to 3% due to Nigeria’s weak oil production and the heavy impact of flooding.
This was disclosed in the 2022 Article IV Consultation concluding statement after an official staff visit to Nigeria.
The IMF said, “Output growth at 3.4 percent (y/y) in 2022Q2 marked the seventh consecutive quarter of growth driven by various services sectors, especially information technology, trade, and finance. “
However, the IMF projects a massive economic slowdown.” Output growth is expected to moderate in 2022 to 3% and improve slightly next year,” the IMF said in a statement.
Reason for the slow down
According to the Washington lenders, oil production has been declining since the middle of 2020 due to low investment and significant leakages brought on by poor maintenance and theft.
Despite Nigeria’s limited direct involvement, the conflict in Ukraine has affected domestic food prices, with headline inflation reaching a 17-year high of 21.1 percent (y/y) in October 2022. High levels of food insecurity exacerbate the pandemic’s disfiguring effects on the weak.
IMF said, “The slowdown in growth reflects year-to-date weaknesses in oil production and the adverse effects of recent flooding. Supported by the authorities’ measures to curb ongoing oil theft and considering new production coming on stream, a protracted recovery in the oil sector is projected beginning late this year.”
“The effects of recent flooding and high fertiliser prices could become more entrenched, impacting both agricultural production and food prices in 2023 negatively. Similarly, further volatility in the parallel market exchange rate and continued dependence on central bank financing of the budget deficit could exacerbate price pressures.”
The International bank stated that In the medium term, there are downside risks to the oil sector from possible price and production volatility. At the same time, climate-related natural disasters pose downside risks to agriculture. There are also upside risks from a more robust rebound in oil production, investment in the gas sector and the Dangote refinery coming onstream with a large production capacity.
