IMF explains why Nigeria’s 2024 economic growth may be slower at 2.9%
The International Monetary Fund (IMF) has projected a slowdown in the country’s growth for 2024.
This was according to the latest World Economic Outlook (WEO) report released on Tuesday.
According to the report, Nigeria’s economy is now expected to grow at 2.9% in 2024, maintaining the same growth pace recorded in 2023.
The latest projection is a 0.2% decrease from the previous projection in July and a 0.4% decrease from the previous projection in April.
According to the international lender, “the revision reflects slower growth in Nigeria, amid weaker-than-expected activity in the first half of the year.”
Also, Jean-Marc Natal, deputy chief of the IMF’s Research Department, further elaborated on Nigeria’s growth challenges, highlighting disruptions in agriculture and oil production as key factors behind the revised growth forecast.
He said this during a press conference on Tuesday unveiling the World Economic Outlook at the ongoing IMF/World Bank annual meetings in Washington, D.C.
Natal said: “We revised growth for Nigeria 2024 by 0.2% down. Things are volatile because the reason for the revision is precisely issues in agriculture related to flooding and issues in the production of oil, related to security and maintenance that have pushed down the production of oil. So, these two factors have played a role.”
However, the IMF also noted that the projected growth for 2025 stands at 3.2%, which is 0.2% higher than the projections made in July and April this year.
What you should know
The IMF’s projection is much lower than that of the World Bank for 2024 and 2025.
In the latest edition of Africa’s Pulse, a recent report by the World Bank, it was projected that Nigeria’s Gross Domestic Product (GDP) will expand by 3.3% in 2024 and slightly accelerate to 3.6% in 2025-2026.
The report read: “Economic growth in Nigeria is projected at 3.3% in 2024 and 3.6% in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results. Inflation peaked in June 2024 (at 34.2% year-on-year) and decelerated to 33.4% in July and further to 32.2% in August.”
However, for the IMF, Nigeria’s inflation is projected to drop from an average of 32.55% in 2024 to 25% by 2025.
During the press conference, the IMF further urged countries facing high inflation, including Nigeria, to adopt tighter monetary policies to stabilise their economies.
Pierre-Olivier Gourinchas, the IMF’s economic counsellor and director of research, stressed the need to balance monetary and fiscal policies in order to tackle inflation and debt challenges.
He said, “In countries where inflation is very high, we recommend a tight monetary policy stance. In some cases, when possible, fiscal consolidation can help, though this is complicated by trade-offs many nations face.”
Gourinchas further stressed the importance of balancing fiscal consolidation with essential spending to promote growth.
He warned that excessive austerity could hamper economic recovery efforts.
He said: “If you try to do too much too quickly, you might have an adverse impact on growth and you have to be careful because most countries have important needs when it comes to spending, whether it is about essential services, healthcare, public investments.”
“We need to protect the kind of spending that is good for growth,” he added.
Nigeria’s economy in the first and second quarter of the year grew by 2.98% and 3.19% respectively amid a surge in inflation and further depreciation of the naira.
