The United Nations (UN) has project that Nigeria’s economic growth may decline in 2024 due to the country’s rising debt, increasing inflation rate and its impact on the welfare of the citizens.
The projection was contained in the UN’s World Economic Situation and Prospects report for 2024 projects released on Monday.
The WESP is a report produced by the United Nations Department of Economic and Social Affairs, in partnership with the United Nations Conference on Trade and Development, and the five United Nations Regional Commissions.
The UN, however, estimated an increase in Nigeria’s growth rate, from 2.9 per cent in 2023 to 3.1 per cent in 2024.
According to the report, Nigeria’s policy reforms enacted in 2023, especially in the hydrocarbon sector, contributed to a moderate improvement in the country’s growth prospects for 2024, with the 3.1 per cent Gross Domestic Product growth forecast.
“Policy reforms enacted by the government of Nigeria in 2023, especially in the hydrocarbon sector, have contributed to a moderate improvement in the country’s growth prospects for 2024, with GDP growth forecast at 3.1 per cent.
“However, ballooning public debt, persistent inflation and a rising cost of living, together with a weak business environment, will pose a downward risk to growth prospects,” the report stated.
The report also pointed out that efforts to boost local oil refining capacity would likely reduce domestic fuel costs in 2024 and beyond.
The UN report stated global trade remained low in 2023, with Africa representing part of the trend and virtually no year-on-year growth in merchandise trade volume in Africa in 2023.
The report predicted an improvement in Africa’s GDP growth in 2024, increasing to 3.5 per cent on average, while externalities are projected to remain unfavourable for the African economies due to a weak global economic outlook and limited external financing opportunities.
“However, a recovery in domestic demand is projected for those countries that experienced economic shocks stemming from currency depreciations, electricity shortages or armed conflict,” it added.
It further stated that while developed countries channel investments into sustainable sectors, developing countries struggle with capital flight and reduced foreign direct investment.
According to the document, the international trade as a growth driver was losing steam, with global trade growth weakening to 0.6 per cent in 2023, and projected to recover to 2.4 per cent in 2024.
“Developing countries face challenges such as high external debt levels and rising interest rates, making access to international capital markets difficult. Decline in official development assistance and foreign direct investment for low-income countries contribute to debt sustainability challenges,” the document stated.
The report said tight financing conditions in international capital markets – deriving from the monetary policy stances of the United States Federal Reserve and the European Central Bank– limit external financing and refinancing opportunities for African economies.
The UN explained that efforts to promote stronger intra-regional trade in Africa, embedded most notably in the ongoing implementation of the African Continental Free Trade Area (AfCFTA), are yet to bear fruit.
“The effects of climate change continue to pose significant downward risks for the economy in Africa. Of the 68 climate vulnerable countries that make up the Vulnerable 20 Group, 28 are African,” the report added.
“The exchange rate pass-through from substantial currency depreciations raised the domestic prices of imports and increased inflationary pressures. Moreover, high fuel prices resulted in higher transport costs, which were passed on to consumers in the form of higher local prices for essential items such as food.
“Food inflation remained elevated, above 30 per cent, for some of the larger economies, including Nigeria, Egypt and Ghana. The member countries of the Central Bank of West African States and the Bank of Central African States, however, managed to keep their inflation rates substantially lower than those of other African economies,” it stated.
