Macroeconomic Report & Economic Updates

The International Monetary Fund (IMF) has retained Nigeria’s economic growth projection for 2023 at 3.2 percent in its recent world economic outlook update, titled “A Rocky Recovery,” for April 2023. However, the IMF increased the country’s economic growth projection for 2024 to 3.0 percent from the 2.9 percent it specified in its January update, which implies that growth will slow down by 0.2 percent in 2024, from 3.2 percent recorded in 2023.

As  of  the  end  of  December  2022,  Nigeria’s  total  debt stock stood at N46.25 trillion, comprising 40.4 percent (N18.7  trillion)  in  external  debt  and  59.56  percent (N27.55  trillion)  in  domestic  debt,  according  to  data from  the  Debt  Management  Office  (DMO)1. This represents  a N6.69  trillion  (16.9  percent)  increase over the  N39.56  trillion  recorded  for  December  2021  and  a 4.96 percent (N2.18 trillion) rise in the fourth quarter of 2022.  The  increase  in  debt  stock  is  a  result  of  new borrowings to fund budget deficits, and the issuance of promissory notes to settle government liabilities, which consequently  increases  the  country’s  debt  obligations and servicing costs. For instance, the debt to GDP ratio has  now  increased  to  23.20  percent,  and  the  debt  per capita  stands  at  N213,430  (using  a  population  of  216 million2 people). The steady and significant increase in Nigeria's  total  debt  stock,  despite  remaining  below  the limits  of  55  percent  suggested  by  the  World  Bank  and IMF, 70 percent suggested by ECOWAS, and 40 percent self-imposed,  raises  serious  concerns  about  the sustainability  of  the  country's  debt  and  its  fiscal vulnerability due to low revenue generation, ineffective diversification  of  sources  of  income,  and  constant exposure  to  shocks  in  the  global oil  market.  Therefore, the government should seriously consider slowing down debt  purchases,  particularly  for  non-investment expenditures. Additionally, measures that would lead to an oil output increment should be taken, such as reviving the incapacitated refineries’ infrastructure and reducing revenue  leakages.  Hence,  economic  diversification should be a top priority for the government to increase revenue  generation  and  lessen  reliance  on  debt  to  pay government expenditures.

As of the end of December 2022, Nigeria’s total debt stock stood at N46.25 trillion, comprising 40.4 percent (N18.7 trillion) in external debt and 59.56 percent (N27.55 trillion) in domestic debt, according to data from the Debt Management Office (DMO)1 . This represents a N6.69 trillion (16.9 percent) increase over the N39.56 trillion recorded for December 2021 and a 4.96 percent (N2.18 trillion) rise in the fourth quarter of 2022. The increase in debt stock is a result of new borrowings to fund budget deficits, and the issuance of promissory notes to settle government liabilities, which consequently increases the country’s debt obligations and servicing costs. For instance, the debt to GDP ratio has now increased to 23.20 percent, and the debt per capita stands at N213,430 (using a population of 216 million2 people). The steady and significant increase in Nigeria's total debt stock, despite remaining below the limits of 55 percent suggested by the World Bank and IMF, 70 percent suggested by ECOWAS, and 40 percent self-imposed, raises serious concerns about the sustainability of the country's debt and its fiscal vulnerability due to low revenue generation, ineffective diversification of sources of income, and constant exposure to shocks in the global oil market. Therefore, the government should seriously consider slowing down debt purchases, particularly for non-investment expenditures. Additionally, measures that would lead to an oil output increment should be taken, such as reviving the incapacitated refineries’ infrastructure and reducing revenue leakages. Hence, economic diversification should be a top priority for the government to increase revenue generation and lessen reliance on debt to pay government expenditures

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), in its 147th meeting, has raised the Monetary Policy Rate (MPR) to 18 percent.1 This represents an increase of 50 basis points from the previous MPR of 17.5 percent. The apex bank attributes this sixth consecutive increase in the MPR since April 2022 to rising inflation in the country, with issues such as the anticipated fuel subsidy removal, exchange rate pressure, and rising energy prices in view, and is a bid to curb rising inflation. The recent inflation figures show that inflation has risen to 21.91 percent as of February 2023 despite the cash crunch in the country and defying the policy measures put in place by the CBN in recent months.2 Hence, Nigeria's rising inflation levels exhibit structural patterns driven by supply-side variables. Consequently, as the MPR has not been effective in curbing inflation in the country, the CBN should aim to tackle the structural drivers of inflation. Continuous MPR increases could be bad for business growth since they could deter companies from borrowing because doing so would increase the cost of borrowing, which could then raise inflation. So, rather than supporting any future hikes in the MPR, the apex bank should address other issues, such as high energy prices, high transportation costs, and a lack of foreign currency that frequently raise production costs.

Headline inflation in Nigeria stood at 21.91 percent in February 2023, representing a month-on-month increase of 0.09 percent over the 21.82 percent reported in January, and a year-on-year increase of 6.21 percent compared to 15.70 percent, which was recorded in the same period in 2022. This is according to the February 2023 inflation data reported by the National Bureau of Statistics (NBS).