The World Bank recent report titled, ‘Stagflation risk rises amid sharp slowdown in growth’, has predicted that production challenges in Nigeria’s oil sector will persist and affect growth.
The report released in Washington DC says the country’s growth is projected to edge up to 3.4 percent in 2022 but will soften to 3.2 percent in 2023 and 2024.
It added that stronger growth this year reflects support from elevated oil prices, recovery in agriculture and manufacturing and structural reforms, such as the Petroleum Industry Act of 2021.
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“Production challenges in the oil sector are expected to persist, weighing on growth. A recovery in non-oil sectors is envisioned to continue, although shortages of fuel and higher food prices would restrain growth. Four in ten Nigerians live below the poverty line, with many more at risk of falling into poverty and becoming food insecure. Increases in food prices would further erode domestic demand,” the report says.
The report added that although forecasts for 2022 and 2023 have been unchanged for Nigeria, Angola, and South Africa, regional growth has been revised down by 0.4 percentage points this year.
“Similarly for 2023, excluding the three largest economies, SSA (sub-Saharan Africa) growth has been revised down by 0.4 percent since January. High inflation is anticipated to depress real incomes and domestic demand across the region.
“An accompanying increase in poverty is especially concerning in countries where many people are already at high risk of falling into food insecurity (Democratic Republic of Congo, Ethiopia, Liberia, Madagascar, Nigeria, Sierra Leone).
“Slowing reform momentum, elevated levels of violence and insecurity, and policy uncertainty are envisioned to continue to deter private investment in many countries. Lingering pandemic uncertainties are expected to continue to weigh on growth in no resource sectors, especially in countries with low vaccination rates.
“Vaccination rates in SSA are anticipated to continue lagging other EMDEs, complicating pandemic management,” the report said.
It added that a growth slowdown could intensify pandemic-induced losses in per capita incomes.
The report further states “In about 45 percent of the region’s economies and a half of its fragile and conflict-affected countries, per capita incomes are forecast to remain below pre-pandemic levels in 2023.
“Only about 40 percent of SSA economies and 39 percent of the region’s fragile and conflict-affected countries were expected to be in this position in January. SSA as a whole is now expected to remain the only EMDE region where per capita incomes will not return to their 2019 levels even next year”.