PESA
PESA Editorial on Nigeria: 1H2022/23

PESA Editorial on Nigeria: 1H2022/23

Nigeria’s economy has had a slow recovery from the shock caused by the COVID-19 pandemic. Real GDP growth is projected to increase from an annual average of 1.4% for 2019 to 2021, to 3.4% in 2022. Inflation is projected to increase from an annual average of 13.9% for 2019 to 2021, to 16.1% in 2022. The elevated inflation is caused by the sanctions against Russia which have increased the price of crucial imports. In the medium-term period from 2023 to 2025, real GDP growth is projected to decrease to an annual average of 3.0%. Meanwhile, inflation is projected to decrease to an average of 12.1% over the medium-term from 2023 to 2025.

PESA Editorial on Nigeria: 1H2022/23
PESA Editorial on Nigeria: 1H2022/23

The Government of Nigeria’s debt has been steadily increasing since 2020. Nigeria’s gross public debt is projected to increase from an annual average of 33.6% of GDP for 2019 to 2021, to 37.4% of GDP in 2022. The increase in public debt is largely due to depreciation of the NGN and the Government of Ghana implementing fiscal expansion to support the economic recovery from the shock caused by the global lockdown response to the COVID-19 pandemic. The fiscal deficit is projected to widen from an annual average of -5.5% of GDP for 2019 to 2021, to -6.4% in 2022. This shows the procyclical fiscal stance taken by the government as spending and further borrowing outpace revenue growth. In the medium-term period from 2023 to 2025, the fiscal deficit is projected to narrow to an annual average of -6.0% of GDP. Therefore, public debt is projected to increase to an average of 40.2% of GDP over the medium-term from 2023 to 2025.

PESA Editorial on Nigeria: 1H2022/23
PESA Editorial on Nigeria: 1H2022/23

Nigeria’s external sector was severely affected by the COVID-19 pandemic in 2020 but the sector has begun recovering due to the rebound in commodity prices, particularly oil prices which have a significant impact on export earnings. Nigeria’s current account deficit is projected to narrow from an annual average of -USD 11.8 billion (approx. -2.7% of GDP) for 2019 to 2021, to -USD 5.5 billion (approx. -1.1% of GDP) in 2022. In the medium-term period from 2023 to 2025, the current account deficit is projected to widen to an annual average of -USD 6.3 billion (approx. -1.0% of GDP). This illustrates a short-lived improvement in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia on global oil prices. Therefore, Nigerian authorities will have to take advantage of the current reprieve and invest in further diversification of the country’s exports away from the continued reliance on oil.

PESA Editorial on Nigeria: 1H2022/23
PESA Editorial on Nigeria: 1H2022/23

Nigeria is scheduled to hold its national elections in 2023 and the election campaigning cycle is currently underway. Incumbent President H.E. Muhammadu Buhari will not be eligible for re-election since he is currently serving a second term in office using his economic recovery, peace and stability, and anti-corruption rhetoric. The current political climate remains tense due to persistent and worsening security challenges posed by Boko Haram and the Islamic State of Iraq and the Levant (ISIL) in northern Nigeria.  At least eight people were killed, and 168 passengers are still missing after gunmen detonated a bomb on the tracks and opened fire on the train linking the capital Abuja with the north-western city of Kaduna on 28 March 2022. This illustrates the continuing security challenges posed by terrorist groups which has also spread to neighbouring countries.

President H.E. Muhammadu Buhari will also seek to play a more meaningful role in resolving conflicts in some ECOWAS members states in West Africa and the Sahel. As a major contributor to the Economic Community of West African States Monitoring Group (ECOMOG), Nigeria’s plays a crucial role for peace and security in West Africa. However, Nigeria is losing prestige and credibility since it has not been able to resolve domestic security challenges. This places Nigeria in a dilemma where it is relied upon for regional security through its contribution to ECOMOG but cannot request for regional assistance to deal with its domestic terrorism problems. This remains the central aim in Nigeria’s regional priorities as the host for ECOWAS.


Siyaduma Biniza

Siya is the Executive Director at PESA.

Siyaduma Biniza

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