IMF cuts Nigeria’s 2022 economic growth forecast to 3%

The International Monetary Fund (IMF) has revised Nigeria’s 2022 real Gross Domestic Product (GDP) growth forecast downward to 3.0 per cent from its earlier projection of 3.4 per cent, citing weak crude oil production and the impact of recent flooding.

In a statement issued after its assessment of Africa’s largest economy, the IMF said Nigeria’s economic growth was expected to slow in 2022 before recording a modest improvement next year.

The Fund attributed the downgrade largely to declining oil production caused by persistent crude oil theft and insecurity in the country’s oil-producing regions, which have significantly reduced output and government revenues.

Nigeria is also grappling with a depreciating currency, rising inflation and efforts to stimulate economic growth amid challenging global economic conditions.

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“Output growth is expected to moderate in 2022 to 3% and improve slightly next year,” the IMF said.

The Fund noted that although inflation remained in double digits, price pressures were expected to ease towards the end of 2022 as the commencement of the harvest season offset anticipated increases in rice prices caused by widespread flooding.

According to the IMF, monetary conditions remained accommodative despite recent interest rate increases by the Central Bank of Nigeria (CBN), as the benchmark policy rate continued to remain below the country’s inflation rate, which stood at 21.09 per cent in October.

At the time of the assessment, the CBN was expected to hold its Monetary Policy Committee meeting to decide whether to maintain or adjust the benchmark interest rate, which stood at 15.5 per cent.

The IMF also raised concerns over continued shortages of foreign exchange, the country’s managed exchange rate system, rising inflation, limited debt-servicing capacity and administrative restrictions on current account transactions.

It warned that these factors were contributing to growing speculation about a possible currency devaluation.

The revised outlook highlights the significant economic challenges facing Nigeria as authorities seek to restore oil production, stabilise the naira, contain inflation and strengthen overall economic growth.