IMF revises Nigeria’s 2022 growth forecast down to 3%

Nigeria’s projected GDP growth for 2022 has been reduced by the International Monetary Fund (IMF) from 3.4% to 3% due to weak Nigerian oil production and strong impact of flooding.

This was revealed in the IMF’s 2022 Article IV consultation statement following the conclusion of an official staff visit to Nigeria.

In the statement, the IMF also projected a massive economic slowdown for the country, causing GDP growth to slow to 3%. Part of the statement said:

  • “Output growth of 3.4% (y/y) in the second quarter of 2022 marked the seventh consecutive quarter of growth driven by various service sectors, especially information technology, trade and finance.”

Reason for slowdown: According to the multilateral lender, Nigeria’s oil production has been declining since mid-2020 due to low investment and significant leaks caused by poor maintenance and theft.

Despite limited direct involvement from Nigeria, the conflict in Ukraine has affected domestic food prices, with headline inflation reaching a 17-year high of 21.1% (y/y) in October 2022. Highs levels of food insecurity exacerbate the disfiguring effects of the pandemic on the weak.

The news continues after this announcement.

  • “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 taking into account the start-up of new production, a protracted recovery in the oil sector is expected to begin at the end of this year.
  • “The effects of the recent floods and high fertilizer prices could become more entrenched, negatively impacting both agricultural production and food prices in 2023. Similarly, higher volatility in the parallel market exchange rate and continued reliance on central bank financing of the budget deficit could exacerbate price pressures.” explained the IMF.

Risks for the oil sector: The IMF stated that, in the medium term, there are possible downside risks for the oil sector due to the possible volatility of prices and production. At the same time, weather-related natural disasters pose negative risks to agriculture. There are also upside risks from a stronger rebound in oil production, investment in the gas sector and the coming on stream of the Dangote refinery with large production capacity.

The news continues after this announcement.