Nigeria projected to have faster oil-led economic growth by 2024
Analysts at Focus-Economics have projected faster economic growth for Nigeria in 2024, based on increased oil production in the highlighted year.
This is according to their November 2023 Consensus Forecast report on sub-Saharan Africa.
The analysts project that the Nigerian economy is expected to grow faster in 2024 compared to the projected expansion for this year. This growth will be primarily driven by increased oil production.
However, there are factors that will limit this growth, including high inflation and interest rates. Additionally, the reversal of economic reforms and potential security issues in the oil-producing Niger Delta region may pose challenges.
A part of the report stated, “The economy is forecast to grow at a faster pace in 2024 relative to this year’s projected expansion on the back of higher oil output. That said, elevated inflation and interest rates will keep a lid on growth. The reversal of economic reforms, and potential insecurity in the oil-producing Niger Delta. Focus-Economics panellists see GDP expanding 3.2% in 2024 and expanding 3.6% in 2025.”
Explaining their stance further, Focus-Economics analysts noted that the recent weakening of the Nigerian naira and the increase in petrol prices led to higher consumer prices in July and August 2023.
This rise in prices puts pressure on private consumption.
To address the rising cost of living and social unrest, the government announced a temporary minimum wage increase for the next six months in early October 2023.
Additionally, in an effort to tackle the surging transportation costs, the government revealed plans to introduce buses powered by compressed natural gas (CNG).
The report also emphasized that the combination of a weaker naira and the removal of fuel subsidies will likely result in continued inflation in the upcoming quarters. It pointed out that monetary policy and fuel prices will be critical factors to monitor.
According to Focus-Economics panellists, consumer prices are expected to increase by an average of 22.0% in 2024, which is an increase of 0.9 percentage points (pp) from the previous month. In 2025, consumer prices are projected to rise by an average of 14.9%.
Furthermore, the report highlighted that the increased crude oil output, particularly with the Dangote Refinery scaling up production, will contribute to much-needed fuel supplies for Nigeria.
However, it also noted that the persisting instability in the Niger Delta region poses a significant downside risk to the overall economic outlook. Focus-Economics panelists anticipate an average daily oil production of 1.35 million barrels in 2024.
The sub-Saharan African context
According to the Focus-Economics report, in 2024, Gross Domestic Product (GDP) growth is anticipated to pick up from this year’s projections due to lower levels of inflation and interest rates.
Nonetheless, the growth is likely to remain below its full potential due to various factors.
These include ongoing security concerns and conflicts, elevated unemployment rates, the impact of extreme weather events caused by climate change, and persistent public deficits and issues related to corruption.
