August 31, 2023/CSL Research

The World Bank in its Global Economic Prospects: “Weakening Growth, Financial Risks” revised its Gross Domestic Product (GDP) projection down to 2.8%y/y from 2.9% previously projected. The World Bank notes that the growth in Nigeria is dampened by the failure of oil production to rebound to pre-pandemic levels.

Also, it was cited that the recovery in the non-oil sector has been plagued by high inflation, the cash crunch due to the redesign on the nation’s currency and illiquidity in foreign exchange market. The International Monetary Fund (IMF) in its World Economic Outlook for July 2023 also noted that the growth in Nigeria is expected to decline with the current insecurity issues surrounding the country’s oil and gas sector.

Noteworthy, that the Nigerian Bureau of Statistics (NBS) reported that the nation’s GDP advanced by 2.5% y/y in Real terms which is lower than the 3.54% recorded in Q2’2022 but higher than the recorded growth rate of 2.31% recorded in Q1 2023. The overall performance of the nation’s GDP performance has been reflecting the downward trend in comparison to their counterparts in the prior year (+3.11% y/y in Q1 2022 and 3.54% y/y in Q2 2022). This has been a response to the policies implemented in the macroeconomic space. Some multinational agencies, have a consensus that the nation’s FY 2023 GDP forecast may come in at to 2.65% y/y which is 45bps lower than its 3.10% y/y growth estimated as at FY 2022.

It was further stated in the report that the combined policies of FX unification, fuel subsidy removal and other policies made simultaneously in H2 2023 has adversely affected components of the GDP such as the household consumption and demand and has also increased firm’s operating cost and reduced private investments in firms.

This has compelled companies to take on a “wait and see” approach to business. Companies have also begun to consider new strategies that will address rising cost of operations and reduced demand for goods and services. The non-oil sector is expected to take the brunt of these new policies as the household consumption and private investment constitute the largest share of the nation’s GDP.

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