Analysts at FocusEconomics have said that Nigeria’s economy will expand by 2.8% in 2023 and 3.7% in 2024.
This is despite the removal of fuel subsidies which has sent food and transportation prices skyrocketing ever since President Bola Ahmed Tinubu assumed office on May 29, 2023.
This was stated in the August 2023 FocusEconomics Consensus Forecast report. According to analysts, Nigeria’s Gross Domestic Product (GDP) growth is seen slowing slightly in 2023.
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The analysts also pointed out that higher interest rates will likely hamper investment growth, while elevated inflation exacerbated by the removal of fuel subsidies and a weaker naira, will keep a lid on overall activity.
The report also stated that the country’s oil sector’s performance and the commitment to a flexible exchange rate are key factors to watch.
However, the FocusEconomics report also notes that the removal of fuel subsidies and the devaluation of the naira will reignite price pressures in the coming months.
Economic activities in Nigeria in the past few weeks, show that Nigerians are still dealing with the fallout from the decision to remove fuel subsidies.
From increased transportation costs to higher food prices and increased costs across several trade and business value chains.
In the cited report, analysts expect the trend to continue while also resulting in an expansion of the economy. A part of the report stated:
- “After slowing in Q1 due to a cash crunch, Nigeria’s economy likely picked up steam in Q2. Oil output rebounded year-on-year in Q1.
- “Additionally, the private sector Purchasing Managers’ Index (PMI) remained entrenched in expansionary terrain through June due to greater cash availability. That said, conditions in the sector improved at a softer rate in June, as the removal of fuel subsidies caused cost spikes.
- “Heading to Q3, early data paints a promising picture. FocusEconomics panellists see fixed investment expanding by 2.8% in 2023, which is down by 0.2 percentage points from one month ago and expanding by 3.7% in 2024.
- “Inflation will face upward pressures in the coming months, following the removal of fuel subsidies in May and the devaluation of the naira in June.
- “FocusEconomics panellists see consumer prices rising 22.9% on average in 2023, which is up by 2.2 percentage points from one month ago and rising 18.4% on average in 2024.”
What you should know:
According to the report, there was significantly stronger inflation in June 2023 (22.79%), after the government removed fuel subsidies in late May. So, both input cost and output charge inflation accelerated markedly.
In turn, growth in output and new orders slowed. Meanwhile, higher inflation expectations regarding input costs caused firms to increase their purchasing activity.