IMF upgrades Nigeria’s economic growth projection to 3.4 per cent

• Says higher food prices hurting Africans’ purchasing power
• Social, political turmoil weighing on West Africa’s economy’

The International Monetary Fund (IMF), yesterday, raised Nigeria’s growth projection for the year by 0.7 percentage points on account of rising oil prices.

In its April’s World Economic Outlook, the IMF projected the country’s output to grow at 3.4 per cent this year as against 2.7 per cent forecast in January. It also raised the 2023 growth prospect by 0.4 percentage points to 3.1 per cent.

The latest 2022 forecast is also higher than the October projection by a similar margin. The Fund has, in October projected the country’s economy to grow at 2.7 percentage points.

It also raised the average growth of sub-Saharan Africa (SSA) for the year to 3.8 per cent, a percentage point higher than 3.7 per cent it envisaged in January while it keeps the 2023 growth at four per cent.

Notwithstanding the optimism, the institution warned that Africans’ purchasing power could be subdued by rising prices of food this year. It pointed out food as the most potent channel of transmission of the current geopolitical tensions and other global economic challenges on the continent.

It noted: “In sub-Saharan Africa, food prices are also the most important channel of transmission, although in slightly different ways. Wheat is a less important part of the diet, but food, in general, is a larger share of consumption.

“Higher food prices will hurt consumers’ purchasing power—particularly among low-income households—and weigh on domestic demand. Social and political turmoils, most notably in West Africa, also weigh on the outlook. The increase in oil prices has however lifted growth prospects for the region’s oil exporters such as Nigeria.”

On the strength of rising uncertainty, the IMF downgrades the global growth projection from its earlier 4.4 per cent to 3.6 per cent. Most the developed countries’ outlooks are negatively affected by war and other challenges.

“Global economic prospects have worsened significantly since our last World Economic Outlook forecast in January. At the time, we had projected the global recovery to strengthen from the second quarter of this year after a short-lived impact of the Omicron variant. Since then, the outlook has deteriorated, largely because of Russia’s invasion of Ukraine — causing a tragic humanitarian crisis in Eastern Europe — and the sanctions aimed at pressuring Russia to end hostilities,” IMF noted.

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It noted that “a significant divergence between the economic recoveries of advanced economies and emerging market and developing ones” remains, adding that war, and frequent and wider-ranging lockdowns in China could trigger new bottlenecks in global supply chains.

The report also acknowledged the distortive impacts of rising inflation across the globe, warning that the normalisation of interest rates especially in developed countries could potentially stifle growth.

Global leaders at the ongoing Spring Meetings of the IMF and World Bank have raised concern about the impacts of rising prices of essentials on especially low-income and vulnerable countries. A multi-agency press statement issued ahead of the meeting called for a coordinated response from developed countries to help poorer countries navigate the challenges.