The International Monetary Fund (IMF) has downgraded its forecast for Nigeria’s economic growth in 2024 to 3.1 per cent, a reduction from the previously projected 3.3 per cent.
The revision was highlighted in the July 2024 World Economic Outlook, which the IMF released on Tuesday.
The downgrade comes in the wake of weaker-than-expected economic performance in the first quarter of 2024.
Data from Nigeria’s National Bureau of Statistics (NBS) showed that the country’s Gross Domestic Product (GDP) growth dropped to 2.98 per cent in Q1 2024, a decline from 3.46 per cent recorded in the last quarter of 2023.
Despite the downward revision for 2024, the IMF has maintained its 3.0 per cent growth forecast for Nigeria’s economy in 2025.
The broader impact of Nigeria’s economic performance also led the IMF to lower its forecast for Sub-Saharan Africa’s growth to 3.7 per cent in 2024, down from the April 2024 forecast of 3.8 per cent.
Nevertheless, the IMF adjusted its 2025 growth forecast for the region upwards to 4.1 per cent from 4.0 per cent.
“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 stated.
On a global scale, the IMF retained its growth forecasts, predicting the global economy to grow by 3.2 per cent in 2024 and 3.3 per cent in 2025.
The IMF noted that global growth remains in line with its previous projections but warned of varied momentum in economic activities, inflationary pressures in services prices, and heightened trade tensions, all of which could complicate monetary policy normalization.
“The global economy is in a sticky spot,” the IMF commented. “Upside risks to inflation have increased, raising the prospect of higher-for-even-longer interest rates, in the context of escalating trade tensions and increased policy uncertainty.
“To manage these risks and preserve growth, the policy mix should be sequenced carefully to achieve price stability and replenish diminished buffers.”
In May, the IMF upheld its projection of a 3.3% growth rate for Nigeria’s economy in 2024, an increase from 2.9% in the previous year.
It attributed this optimistic outlook to improvements in the services and trade sectors. However, the IMF also highlighted significant challenges, particularly in the context of food price inflation, which reached 40% in March, raising concerns about food security in Africa’s most populous nation and leading oil producer.
IMF mission chief for Nigeria, Axel Schimmelpfenning, had emphasised the difficulty of sustaining such growth, noting that a 3.3% growth rate barely surpasses the country’s population growth rate.
“If Nigeria grows at 3.3%, that is just above the population dynamics, which is a big challenge,” Schimmelpfenning said at the time.
The IMF forecast that fuel subsidies could account for up to 3% of GDP this year, as the increases in pump prices have not kept pace with their dollar costs. Schimmelpfenning noted that officials are committed to phasing out these subsidies within the next one to two years.
“The reforms are focused on how to raise that growth so that Nigerians can see real impacts on their living standards,” Schimmelpfenning said.
The IMF’s assessment was also mirrored by global rating agencies, with Fitch also upgrading Nigeria’s economic outlook to positive from stable on May 3.
Despite acknowledging significant progress, Schimmelpfenning cautioned that longstanding issues could not be resolved in a rush.
“We think a lot has happened. We also have to recognize that the problems built up over many years were quite severe. We can’t expect that everything is going to be resolved overnight,” he added.
