The World Bank has said that Nigeria’s growth momentum has been affected by macroeconomic issues such as the Naira redesign, shortages of foreign exchange and incessant high inflation rate.
The Bank said this in its global economic prospects for Sub-Saharan Africa (SSA) report for June 2023. According to the report, this slow growth was also experienced in two other African countries namely; Angola and South Africa, the report states that growth in these countries which are the largest Sub-Saharan African economies slowed to 2.8% in 2022.
The report added that harsh conditions such as high and persistent inflation, further tightening of global financial conditions, domestic policy tightening, and flare-ups of violence and social unrest in some countries, have also affected other countries’ economic growth around the world. In addition, it said the growth momentum was further stalled amid lower energy prices and stagnant oil production.
“The post-pandemic rebound in Nigeria’s non-oil sector cooled earlier this year because of persistently high inflation, foreign exchange shortages, and shortages of banknotes caused by currency redesign. Growth in Nigeria is expected to remain barely above the population growth—far slower than needed to make significant inroads into mitigating extreme poverty,” the report stated.
According to the Bretton Woods Institutions, growth in Sub-Saharan Africa is expected to decline further to 3.2% in 2023 and may pick up again to 3.9% in 2024.
For the three largest Sub-Sahara African economies, the Bank said the average per capita income growth in 2023-2024 is not expected to exceed 0.5% hence prospects for poverty reduction in the region remain bleak, with almost 40% of the Sub-Sahara African population living in countries with lower per capita incomes next year than in 2019.
In addition, the World Bank said that major regional economies in Africa are experiencing a high cost of living therefore restraining private consumption and causing tighter policies holding back investment inflow.
“Growth in SSA continued to decelerate earlier this year owing to various country-specific challenges and heightened external economic headwinds; worsened domestic vulnerabilities together with tight global financial conditions and weak global growth are expected to keep recoveries subdued,” it stated.
Ajay Banga, president, of the World Bank Group said the surest way to reduce poverty and spread prosperity is through employment, however, slower growth like the one currently being experienced in Nigeria makes job creation much harder.
On a global level, the World Bank states that growth is projected to decelerate from 3.1% in 2022 to 2.1% in 2023.
The Chief Economist and Senior Vice President, of World Bank Group, Indermit Gill said; In emerging markets and developing economies, debt pressures are growing due to higher interest rates, adding that fiscal weaknesses have already tipped many low-income countries into debt distress.
“The world economy is in a precarious position, in 2023, trade will grow at less than a third of its pace in the years before the pandemic; the financing needs to achieve the sustainable development goals are far greater than even the most optimistic projections of private investment,” Indermit said.
Similarly, Ayhan Kose, Deputy Chief Economist, World Bank Group said many developing economies are struggling to cope with weak growth, persistently high inflation, and record debt levels amid the possibility of more widespread spillovers from renewed financial stress in advanced economies which could make matters even worse for them.
“Policy makers in these economies should act promptly to prevent financial contagion and reduce near-term domestic vulnerabilities,” Kose said.
What does this report mean for Nigeria?
To answer this question, the government and all stakeholders first need to understand the effects of this slow growth on the poor masses and the economy at large. The causative factors of this slow growth, i.e. Naira Redesign, High Inflation and Shortage of FX according to the World Bank must be approached with a recommended solution of more job creation across different sectors. Nigeria has to start producing more than it consumes, the country has to make other sectors outside oil and gas become more viable and attractive for local and international investors, sectors such as agriculture, power, waste management/recycling, information technology and so on must be looked into with a viable plan of success and creating more jobs.