FocusEconomic Analysts Forecast 2.8% GDP Growth for Nigeria in 2023 Despite Fuel Subsidy Removal
According to the August 2023 FocusEconomics Consensus Forecast report, Nigeria’s economy is projected to expand by 2.8% in 2023 and 3.7% in 2024. This growth forecast comes despite the challenges posed by the removal of fuel subsidies, which led to soaring food and transportation prices since President Bola Ahmed Tinubu assumed office on May 29, 2023.
While analysts expect a slight slowdown in GDP growth in 2023, higher interest rates and elevated inflation, exacerbated by the removal of fuel subsidies and a weaker naira, are likely to hinder investment growth and overall economic activity.
The performance of Nigeria’s oil sector and its commitment to a flexible exchange rate will play crucial roles in shaping the country’s economic outlook. However, the report also highlights that the removal of fuel subsidies and devaluation of the naira will reignite price pressures in the coming months.
The fallout from the decision to remove fuel subsidies is still impacting economic activities in Nigeria, resulting in increased transportation costs, higher food prices, and increased costs across various trade and business value chains.
Despite the challenges, early data for Q2 shows signs of economic improvement, with a rebound in oil output and an expansionary private sector Purchasing Managers’ Index (PMI) due to increased cash availability. However, the removal of fuel subsidies caused cost spikes, which could lead to upward pressures on inflation in the coming months.
The report projects a 22.9% average rise in consumer prices in 2023, up by 2.2 percentage points from one month ago, and an average increase of 18.4% in 2024.
Overall, while facing economic headwinds, Nigeria’s economy is expected to grow, with fixed investment forecasted to expand by 2.8% in 2023 and 3.7% in 2024, according to FocusEconomics analysts. However, the nation will need to address inflationary pressures and carefully manage its economic policies to ensure sustained growth and stability.