Raises GDP growth forecast to 3.4% for 2022
Projects 15.5% inflation rate for 2022
By Babajide Komolafe & Elizabeth Adegbesan
The World Bank yesterday raised its forecast for Nigeria’s public debt to 36 per cent of Gross Domestic Product, GDP, in 2022, citing worsening revenue collection at the federation level, which is increasing budgetary pressures and pushing many states into precarious fiscal positions.
The new forecast is 3.7 percentage points higher than the 32.3 per cent earlier projected by the bank in November last year.
The World Bank gave the new forecast in the June 2022 edition of its Nigeria Development Update, NDU.
Though the World Bank also raised its 2022 GDP growth forecast for Nigeria to 3.8 per cent, citing robust recovery in the non-oil economy and higher global oil price, it however expressed concerns over rising inflation, and thus raised its inflation rate forecast for 2022 to 15.5 per cent, up from 13.5 per cent projected in the November 2021 NDU edition.
Consequently, the World Bank said that reducing inflation is the key policy priority for the country, stressing that rising prices continue pushing millions of Nigerians into poverty.
In the same vein, the World Bank said that the nation’s fiscal deficit to GDP ratio will rise faster than earlier projected. Hence, it raised its forecast for the nation’s fiscal deficit to GDP ratio to 5.8 per cent for 2022, up from 5.3 per cent earlier projected.
On forecast for Nigeria’s economic growth, the World Bank stated: “Nigeria’s growth prospects for the next three years have improved thanks to a more robust recovery in the non-oil economy and higher global oil prices.
“We have revised growth estimates upwards: Nigeria’s gross domestic product, GDP, is projected to now grow by 3.4 percent in 2022 and by 3.2 percent in 2023, up from the previous forecasts of 2.8 percent for 2022 and 2023 from November 2021. “Two factors explain the revision. First is the better-than-expected performance of the services and agriculture sectors. Second, higher oil prices stemming from the Ukraine war will boost Nigeria’s economic growth, though less than anticipated.”
Explaining the rationale for raising its forecast for the nation’s public debt, inflation rate and fiscal deficit to GDP ratio, the World Bank said: “Nigeria is in a paradoxical situation where growth prospects have improved, but the overall macroeconomic framework is deteriorating.
“Compared to the last NDU, our revised estimates for inflation, the fiscal deficit, and public debt indicate a more vulnerable macroeconomic position in 2021 and the first half of 2022, which is further, compounded by the increasing premium between the official and the parallel (black market) exchange rates.
“The weakening of Nigeria’s macroeconomic framework is mainly due to the absence of concerted efforts to reduce inflation, address fiscal pressures, and strengthen exchange rate management.
“As a result, inflation is expected to be two percentage points higher in 2022–2023 than in our baseline scenario from six months ago.
“In addition, against a burgeoning petrol subsidy (estimated to cost over $9 billion in 2022 or almost 2 percent of GDP) and low oil production, the general government fiscal deficit for 2022 has been revised upwards from 5.3 to 5.8 percent of GDP. “
Consequently, the public debt ratio to GDP is projected to reach 36 percent in 2022, up from our previous 32.3 percent projection six months ago.”