Of late, global economic growth has been moving at snail’s speed owing to several factors ranging from soaring interest rates, rising inflation, reduced investment, as well as supply disruptions occasioned by the Russo-Ukraine war.
This grim scenario notwithstanding, incurable optimists, and indeed some members of the global community still had high hopes, as they looked forward to some cheery news on the economic front in the opening days of 2023. But the latest edition of the World Bank’s Global Economic Prospects report, effectively foreclosed such chances.
The new report published last Tuesday, apart from painting a bleak picture, cautioned that any new adverse development could further push the global economy into another round of recession. This includes higher-than-expected inflation rates, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions.
“Yet, faced with extremely high government debt levels and rising interest rates, advanced economies are absorbing global capital. Per-capita income growth in emerging market and developing economies is projected to average 2.8 per cent, a full percentage point lower than the 2010-2019 average.”
Interestingly, Sub-Sahara Africa, which is responsible for over half (about 60 per cent of the world’s extreme poor), growth in per capita income over 2023 to 2024 is nothing to write home about, as it is expected to average just 1.2 per cent, which can make poverty to bloom, and not blight away.
According to the President of the World Bank Group, David Malpass: “The crisis facing development is intensifying as the global growth outlook deteriorates.
“Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment in businesses.
“This will compound the already-devastating reversals in education, health, poverty, and infrastructure and the increasing demands from climate change,” he said.
While the speed of growth in advanced economies is projected to slow down from 2.5 per cent in 2022, to 0.5 per cent in 2023, that of the United States, the forecast suggests will fall to 0.5 per cent this year. And that would be a 1.9 percentage point below previous forecasts, as well as the weakest performance outside of official recessions since 1970.
Data available confirm that in the last twenty years, economic slowdowns of this magnitude, have set the stage for a global recession.
As a member of the international community that is battling her demons, Nigeria’s economy is not insulated from the prevalent economic vagaries, as her growth is also projected by the World Bank to decelerate to 2.9 per cent this year, and remain there till next year.
The growth projection by the Washington-based institution arises from challenges witnessed in the oil and non-oil sectors of the nation’s economy with the outfit emphasising that positive movements in the non-oil sector would likely be encumbered by lingering weakness in the oil sector, even as existing security and production challenges, and moderation in oil prices, are expected to join forces to slow down oil output recovery.
“Urgent business-unusual choices are needed to avoid a scenario in which up to 80 million working-age Nigerians do not have a full-time job by 2030 and up to 23 million more Nigerians could be living in extreme poverty.”
That was how Shubham Chaudhuri, the World Bank Country Director for Nigeria, gave his perspective at the launch of the latest Nigeria Development Update (NDU), in Abuja recently.
The update saw the Bretton Woods institution cut Nigeria’s 2022 growth forecast to 3.1per cent from a previous forecast of 3.8 per cent.
Chaudhuri at the event also said that Nigeria has a choice to implement critical macroeconomic and structural reforms that can reduce crisis vulnerabilities and increase growth.
According to him: “Doing so will lift per capita incomes, sustainably reduce poverty and deliver better life outcomes for many Nigerians.”
Without a doubt, the World Bank’s decision to review the country’s GDP is a fallout of the nation’s poor economic performance on many fronts.
Last November, the National Bureau of Statistics (NBS), released its 2022 Multidimensional Poverty Index (MPI) report, which classified over 133 million Nigerians, which is about 63 per cent as being multidimensionally poor.
The Third Quarter (Q3) 2022 GDP growth rate report by the NBS also showed that Nigeria’s GDP grew by 2.25 per cent (year-on-year) in real terms in the Q3 of 2022, representing a 1.78 per cent decline compared to the 4.03 per cent growth recorded in Q3 2021.
That is not all, the NBS also reported that the nation’s inflation climbed to 21.47 per cent in November from October’s rate of 21.09 per cent, accelerating for the 10th consecutive month.
The nation is also bogged down by a high debt burden of over N42 trillion with debt service consuming over 80 per cent of the nation’s revenue.
The World Bank said that Nigeria’s economic growth has slowed on the back of declining oil output and moderating non-oil activity, adding that real gross domestic product (GDP) rose by 3.1 per cent year-on-year in the first three quarters of 2022, just a little more than the annual population growth of 2.6 per cent.
The Senior Special Adviser to the President of the African Development Bank (AfDB) on Industrialisation, Prof Oyebanji Oyelaran-Oyeyinka, after a cursory look at the scenario, said that the slowdown in economic growth comes with diverse implications, chief among which is unemployment.
According to him, there is a correlation between economic growth rate and employment growth rate, adding that a country’s gross domestic product (GDP) needs to grow at around four per cent for one year to achieve a one per cent reduction in the rate of unemployment.
“By far the real causes of weak employment, poverty and slow economic growth is Nigeria’s loss of its emergent industrial base starting in the mid-1980s. For example, the textile industry during the period employed over one million workers taking care of thousands of urban households. Today, that industry plus others has disappeared and in turn led to huge unemployment and the mass poverty that is now showing up in these macroeconomic indicators. At the heart of our challenges is a consumption-based urban population for the most part living in misery.”
He said the way forward is for the next administration coming in 2023 to prioritise industrialisation.
“My priorities will involve building massive agro-industrial processing zones that the AfDB has been promoting across all states of the federation,” he said, adding, “all the money wasted in unprofitable institutions, let’s aggregate them and put them to building production-enhancing infrastructure such as the Special Agro-Industrial Processing Zones (SAPZ) Programme.
“Second, implement difficult reforms such as implementation of the Orasanye Report. That report is a devastating critique of governance failure. Lastly, take decisive and bold steps to deal with the around 12,000 abandoned projects costing over N8 trillion (2011 estimate) that are lying waste all over the country. Some may be salvageable,” Oyeyinka concluded.
Commenting on the implications of the downgrade, the Founder/CEO of, the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said that the challenges that citizens are currently facing would worsen if there are no further changes in the way that the Federal Government manages the economy.
“The World Bank made suggestions as to what we need to do to achieve the growth rate that it projected. Unfortunately, we have not done anything to bring about positive change. The projections that the bank made were based on what ordinarily should happen in an oil-producing country, given the increase in oil prices. Unfortunately, we have not been able to take advantage of the oil price increase because of our numerous challenges, including crude oil theft, oil subsidy regime, as well as the challenge of low investment in the oil sector,” Yusuf stated.
He added that Nigerians should not wish away the recommendations of the World Bank, “especially the ones that touch on reforming the nation’s oil sector, reforming the multiple foreign exchange policy, and reforming our trade policy to support the economy.”
The CPPE founder charged the new government to assemble a team that has a proper understanding of how the economy works.
“The new government should as much as possible de-couple economic management from politics. One of the issues that we have with the present administration is that there is too much political interference in economic issues. The economy is bleeding while some people are smiling at the bank. That is not the kind of ecosystem we want, “ he said.
For Consultant, ECOWAS Common Investment Market, Prof. Jonathan Aremu, said the consequences of the slow economic growth include the fact that Nigeria has more mouths to feed, but with fewer opportunities to feed them. That will translate to increasing the number of people that will be poor.
He said that the World Bank before making projections “will look at your productivity level, look at the different sectors of the economy, and what the projections for these sectors are. … These sectors are the agriculture, manufacturing, and the services sectors. Whatever is happening in those sectors has substantial implications for the economy.
“The services and the agriculture sectors have been growing, but the manufacturing sector is not growing the way it should grow because of the harsh economic environment with respect to access to funding, good infrastructure as well as the exchange rate that is not friendly and so they cannot import their raw materials, and when they even import, it did at a high price.”
Prof. Aremu said the government has to come out with robust policies that would drive the economy out of the woods. “If our population continues to grow at the rate it is without corresponding economic growth, we will be in trouble this year,” he said, adding that Nigeria has the potential to become an industrial country, but the major decline has been coming from the manufacturing sector.
“And when you look at what is causing it most of the time, it is inadequate power supply. The cost of power is extremely high, and the cost of fuel is also killing. So, the new government should tackle that. Why do I say that even God when he was about to start creation said, ‘let there be light,’ which means that there cannot be productivity without light.”
He warned that the country could miss a golden opportunity created by the African Continental Free Trade Agreement (AfCFTA) if it fails to do the needful.
According to him, “Quite a lot of things still need to be done before we can trade under AfCFTA. The strategy is ready, but we have not domesticated the agreement. The Nigerian Constitution, Article 12 Sub-section 1 says that any international treaty must be domesticated before it can be implemented in the Nigerian economy, it must enjoy the support of the National Assembly. I am not aware if the National Assembly has passed any law that says that Nigeria can trade under AfCFTA.
“The National Action Committee on AfCFTA has done so much, they are doing a lot of sensitisation, and the organised private sector (OPS) is eager to begin trading. You said they can go ahead to trade, if they go ahead to trade and there is a conflict with our domestic laws, how would you resolve that? So, the government machinery, that is, the executive, the legislature and the judiciary need to play their roles as quickly as possible to make sure that we take advantage of the opportunities that AfCFTA offers.”
The downward revision of the country’s GDP growth rate is not surprising to Mr. Taiwo Oyedele, a fiscal policy partner, and Africa Tax Leader at PwC given the fragile state of economic recovery since COVID-19, which further worsened not only due to the Russia-Ukraine war, but also Nigeria’s specific challenges from oil theft, insecurity, naira depreciation, ballooning of fuel subsidy, the decline in foreign direct investment, as well as domestic capital formation.
He said that with slow growth at about or below the population growth rate, Nigeria will be unable to pull the over 133 million people out of multidimensional poverty, or worse still, push more people into extreme poverty with the attendant social and economic implications.
According to him, “While making tough policy choices may be difficult, especially in a pre-election year, there are a lot of not-so-difficult policy decisions that can help stimulate growth without any adverse political consequences. For instance, the government should address the inefficiency in the petroleum products sector, better tackle oil theft, improve the transparency of foreign exchange management, and address other major impediments to business growth and avoid abrupt policy changes and inconsistency.”
The Chairman of the Financial Reporting Council of Nigeria, Dr. Sam Nzekwe, said the incoming administration would have an uphill task revamping the economy, noting that apart from the fact that Nigeria has not fully recovered from the COVID-19 shocks, the Russia-Ukraine war has dealt Nigeria a devastating blow since the country is an import dependent country where almost everything is imported.
“So I am not surprised that the World Bank took the decision to downgrade our economy. It will be an uphill task for the incoming government because the economy has been battered. The new government will have to take tough decisions to be able to redirect the economy towards growth,” he stated.
Nzekwe added: “The war in Ukraine is hurting the global economy. This has made it difficult for us to import raw materials, foods, and petroleum products. And even when we do, we are only importing inflation into the country. That is why you see that our inflation rate is galloping consistently.
“Again, even agricultural products that we can produce we still have problems there because of insecurity. Farmers can no longer go to their farms because of the fear of being killed, or kidnapped.” He said that the incoming government must first of all deal with insecurity and end it so that the country can provide food for its people.
“Second, it is sad that we have not been able to develop our infrastructure, especially power. What meaningful thing are you going to do in an economy without power? Our manufacturers are spending a large chunk of their capital to provide power for their factories. That is why goods are so costly in the market. So, the government should tackle the issue of power and deal with it.
“The government should also reduce the cost of governance, which is too high. We can’t be wasting money on people that are not adding value to the economy.” The Lead Director of Centre for Social Justice (CSJ), Eze Onyekpere is of the view that downgrading the country’s economy is an ominous sign.
According to him: “If your economy is downgraded it means that you are not performing well, and it will affect your credit rating. It will also determine how they will relate with you in terms of credit rating, in terms of the kinds of structural reforms they may want you to embark on, and in terms of recommendations on how to run your economy. So, it is not a good thing that you are downgraded.
“The first thing the new government should do is to embark on structural reforms, remove fuel subsidy, plug leakages in the system, and of course improve revenue generation,” he summarised.
The Executive Director/of Africa International Trade & Commerce Research, Sand Mba-Kalu, in his contribution said the poor performance of the economy will lead to sluggish economic growth, low human capital, labour market weaknesses, and exposure to shocks, thus increasing Nigeria’s poverty index.
He added that it would also have a direct impact on the nation’s inequality gap, as well as drive more Nigerians into multidimensional poverty.
“Drivers of poverty in Nigeria include lack of education, access to basic infrastructure (such as electricity, safe drinking water, and improved sanitation), climate and conflict shocks, which have led to food and human insecurity in the country,” he said.
He added that the way forward is to make Nigeria’s growth strategy have evidence-backed research, which would ensure Nigeria’s economy evolves to accommodate its uniqueness.
“This strategy will deliver prosperity that will create a middle class whose output will create confidence and stability in the economy,” he said.
