February 7, 2023/CSL Research
The International Monetary Fund (IMF) in its latest World Economic Outlook update for January, has reviewed upwards the growth projections for Nigeria in 2023 from 3.0% which was projected in October 2022 to 3.2% while retaining the growth forecast for 2024 at 2.9%. The report noted that the upward review reflects expected growth in 2023 associated with current measures to address insecurity issues in the oil sector. The agency also reviewed the growth for sub-Saharan Africa to 3.8%, slightly higher than the initial 3.7% projected. For emerging markets and developing economies, IMF projects growth to rise modestly, from 3.9% in 2022 to 4.0% in 2023 and 4.2% in 2024, an upward revision of 0.3ppt for 2023 and a downward revision of 0.1ppt for 2024. It also expects about half of emerging markets and developing economies to have lower growth in 2023 than in 2022.
Nigeria’s growth in 2022 was supported by the non-oil sector (+5.01%), while the oil sector (-20.7%) remained in contraction. The growth in the non-oil sector was driven by traction from services, which profited from the uplift in ICT, catalysed by telcos infrastructural spending. Also, the mobile money launch by two MNOs provided additional support for ICT. Furthermore, increased activities of B2C & B2B ecommerce businesses had a positive passthrough to the trade value chain, while financial services gained from resilient credit allocation. The Agric sector touched new lows in 2022, as unabated insecurity and reported cases of flooding in over 35 states resulted in a drag on output. The manufacturing sector grew modestly by 2.31% in 2022, reflecting the negative impact of CBN’s hawkish rendition, especially in the second half of the year. In fact, the sector contracted by 1.91% in Q3 2022,
the first contraction since covid hit in 2020.
In 2023, we project the oil sector will recover. We expect a sustenance of the recent upbeat in the crude oil production numbers. Our expectation is based on the increased pipeline surveillance and the clampdown on oil theft by the government. Aside from the oil sector, we expect the services sector to maintain its growth pace in 2023, supported by gains from ICT. In our view, the rollout of the 5G network and the growing expansion of mobile money should drive ICT output. Elsewhere, we expect trade to positively impact on the services sector, profiting from improved cross-border trade and B2B/B2C activities. Hence, we project growth to settle at 3.1% in 2023.
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