In its latest Global Economic Prospect report released recently, the World Bank raised Nigeria’s 2022 growth forecast to 2.5 per cent. This represents a marginal upgrade of 0.4 per cent from its earlier prediction of 2.1 per cent for the country in June 2021. The multilateral institution explained that it based its latest growth forecast on improved prospects for oil price this year. Current oil price hovers between $82.79 and $84.95 per barrel, the highest in about six years. The bank also revised its growth forecast for Nigeria next year upwards to 2.8 per cent.
Similarly, the bank raised its forecast for sub-Saharan Africa to 3.6 per cent from 3.3 per cent in June 2021. However, it slightly downgraded global growth forecast to 4.1 per cent from the 4.3 per cent it predicted last June, citing the resurgence of COVID-19, diminished policy support and lingering supply chain bottlenecks. The bank’s growth forecast for Nigeria is slightly lower than the 2.7 per cent growth by the International Monetary Fund (IMF). It also came just as the Lagos Chamber of Commerce and Industry (LCCI) predicted a positive Gross Domestic Product (GDP) outlook of the country this year at 3.5 per cent.
The predictions appear positive. However, the government must do something to leverage on the seemingly positive economic outlook through good policy initiatives that will enable it overcome the prevailing economic challenges that hinder sustainable economic growth. While the indicators given by the global financial institutions may raise expectations that Nigeria’s economy would rebound this year after many years of being in negative territory and after exiting its longest recession in six years, we call for cautious optimism considering that a forecast is only an economic assumption that can be achieved or not depending on some variables.
The economic performance of 2022 for Nigeria will largely be determined by a combination of factors such as the implementation of the budget and the recently approved 5-year Development Plan, the effect of the planned petrol subsidy removal, the cost reflective tariff and exchange rate floatation. It will also be affected by the lowering of deficit financing, poverty reduction, unemployment rate and inflationary trends, soaring interest rates, among others.
Also, Nigeria was among developing economies listed by the World Bank as being adversely hit by harsh economic weather that put the private sector under intense pressure. According to the bank, about 60 per cent of low-income countries, including Nigeria are already at high risk, or in debt distress. With rising inflation, for instance, the supply chain is likely to be disrupted. The inflationary pressure arising from exchange rate volatility, which was adverse in 2021, may spill over in 2022 except the Central Bank of Nigeria (CBN) reviews the forex market. Therefore, the apex bank’s plan to spend $8billion this year to defend the naira and increase forex supply to the manufacturing sector is welcome. It will keep the parallel market in check.
We reiterate the need for the CBN to reduce the lending rate, which has remained unchanged for so long because it discourages borrowing, especially by small businesses that are critical in stimulating economic growth. The positive economic growth forecast by the World Bank will be meaningless if the economy continues to be hampered by poor investments, weak revenue generation, poverty, youth unemployment, erratic power supply and insecurity.
It is unfortunate that Nigeria’s ratio of revenue to the GDP had been the lowest among its peers in Africa between 2015 and 2020. There is also concerns that the rate of economic growth is slower than the rate at which the country’s population is growing. As the Economic Advisory Council had advised the government, there is need to strengthen national statistical agencies, reform procurement processes, improve education and job planning.
Besides, there is need for macroeconomic stability and a friendly climate for foreign investment. At present, the inflow of direct foreign investment has decreased. To attract more foreign investments, we must scale up the ease of doing business, improve security and power supply. It is sad that most businesses supply their own power. Apart from raising cost of production, it leads to increase in price of goods. In all, the Federal Government should not assume that the positive growth forecast will translate to economic recovery if certain things are not put in place. Indeed, Nigerian economy is still very much in negative territory. Let government reduce national debt and rising debt servicing. It must also put in place strong fiscal and monetary policies that will stimulate economic growth.