The International Monetary Fund, or IMF, forecasts that in 2023, Nigeria’s economic growth will slow to 3.0% while its inflation rate will fall to 17%.
The Monetary Fund called for fiscal policies that support current efforts by central banks to curb inflation as well as protect the vulnerable population from inflation when it made these projections in the IMF October World Economic Outlook, WEO, released on the sidelines of the ongoing IMF/World Bank annual meetings in Washington DC.
Nigeria’s Gross Domestic Product, or GDP, is expected to rise by 3.2% in 2022 and 3.0% in 2023, according to the IMF, which is 0.2 percentage points less than the 3.4% and 3.2% growth rates predicted in the July WEO, respectively.
However, the IMF predicted that Nigeria’s inflation rate would drop to 19% in 2022 and 17% in 2023.
Daniel Leigh, Divisional Chief, Research Department, IMF, stated that the lower inflation rate projections for Nigeria are based on the recent increase in the Monetary Policy Rate, MPR, by the Central Bank of Nigeria, CBN, as well as the global decline in the price of crude oil and food, at the October WEO press briefing held on the sidelines of the ongoing IMF/World Bank annual meetings in Washington DC.
According to him, “For Nigeria, in particular, we forecast inflation at about 19% this year, but some moderation down to 17% next year. And part of that does reflect the monetary policy actions, which is the 4% point increase in Nigeria’s Central Bank as well as the decline that we expect in oil and food prices globally,” he said.
IMF Director of Research Pierre-Olivier Gourinchas provided guidance to the CBN and its international counterparts on the selection of monetary tools required to reduce inflation.
The IMF’s lower growth rate forecast for the world economy in 2023 was consistent with the forecasts for the growth of Nigeria’s GDP.
The IMF reduced its projection for 2023 to 2.7%, which is 0.2 percentage points lower than the July forecast, even though it kept its forecast for global economic growth in 2022 at 3.2% in the October WEO.
The Russian invasion of Ukraine, a cost-of-living problem brought on by persistent and expanding inflation pressures, and China’s slowdown are all factors that the IMF cited as the reason for its lower growth prediction for the world economy.
First, fiscal policy shouldn’t conflict with the efforts of the monetary authorities, he said. Contrarily, as recent events serve as a reminder, doing so will merely prolong inflation into a catastrophic financial instability.
“Fiscal policy should instead focus on imposing temporary, targeted limits while protecting the most vulnerable. Thirdly, by making investments in human capital, digitization, green energy, supply chain diversity, and productive capacity, fiscal policy can aid economies in adjusting to more unpredictable situations. By increasing these, economies can be better prepared to withstand the next crisis. Unfortunately, at the moment, these crucial concepts are not always used to guide policy.