The International Monetary Fund (IMF) has cut its forecast for Nigeria’s economic growth in 2024 to 3.1 per cent from its earlier forecast of 3.3 per cent.
The downgrade is contained in IMF’s July 2024 World Economic Outlook released on Tuesday.
The IMF cited a weaker growth recorded in the first quarter of the year, Q1’24 as reason for the new forecast.
Nigeria is embarking on some monetary reforms with the central bank clearing foreign exchange backlog and the federal government removing petrol subsidies. These reform measures have however exposed the country to galloping inflation and rising poverty, which has put a dent on the reforms.
Data from the National Bureau of Statistics (NBS), showed that Nigeria’s Gross Domestic Product (GDP), growth dropped, quarter-on-quarter, to 2.98 per cent in Q1’24 from 3.46 per cent in the fourth quarter of 2023.
The country is currently facing galloping inflation which hit an all time high of 34.19 per cent in June according to the National Bureau of Statistics (NBS) in its recent Consumer price index (CPI) report. Food prices have skyrocketed as food inflation also jumped to 40.87 per cent in June 2024, thus worsening the living conditions of the citizens.
The IMF however retained its 3.0 per cent forecast for Nigeria’s economic growth in 2025 which is adjudged to be higher than growth estimates of most emerging markets (EMs).
As a result of the lower forecast for Nigeria’s economic growth, the IMF also downgraded its forecast for Sub-Saharan economic growth in 2024 to 3.7 per cent from the April WEO forecast of 3.8 per cent. It however raised its economic growth forecast for the region in 2025 to 4.1 per cent from 4.0.
“The forecast for growth in sub-Saharan Africa is revised downward, mainly as a result of a 0.2 percentage point downward revision to the growth outlook in Nigeria amid weaker than expected activity in the first quarter of this year,” the IMF said.
While South Africa’s growth in 2025 is projected at 1.2 per cent from 0.9 per cent this year, Brazil’s growth stands at 2.4 percent growth from 2.1 percent in 2024.
The IMF also said Mexico will grow by 1.6 per cent in 2025 as against 2.2 per cent in 2024.
However, India’s projection is higher than Nigeria’s at 6.5 per cent in 2025, from 7 per cent this year.
For the global economy, the IMF retained its growth forecasts of 3.2 per cent in 2024 and 3.3 per cent in 2025.
The IMF said: “The Global Economy in a Sticky Spot Global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 per cent in 2024 and 3.3 per cent in 2025.
“However, rising inflation may slow down the process of normalising monetary policies in emerging markets. At the same time, several central banks in emerging market economies remain cautious about cutting rates owing to external risks triggered by changes in interest rate differentials and associated depreciation of those economies’ currencies against the dollar.”
The IMF recommended that central banks avoid easing their monetary policy stances too early, to manage inflation risks and preserve economic growth.
“In countries where upside risks to inflation—including those arising through external channels—have materialized, central banks should refrain from easing too early and remain open to further tightening should it become necessary.
“Where inflation data encouragingly signal a durable return to price stability, monetary policy easing should proceed gradually, which would simultaneously provide room for the required fiscal consolidation to take place. Fiscal slippages over the past year in some countries could require a stance significantly tighter than envisaged,” it said.
As inflation has sustained its upward trend, analysts believe that the Monetary Policy Committee of the Central Bank of Nigeria will also hike the benchmark lending rate given its avowed inflation-fighting stance.
At different fora, the CBN governor, Dr Olayemi Cardoso, has maintained that the members of the MPC will keep the rates high to tackle inflation.
Since the beginning of the year, the MPC has raised the MPR by 650 basis points, bringing the rate to 26.25 per cent as of May 2024. The MPC is due to meet later this month.