Nigeria’s economic growth in 2023 is at risk of being fragile, with oil production remaining low and the new administration facing multiple policy challenges, says a new report by the World Bank.
The new report, titled ‘Africa’s Pulse: An Analysis of Issues Shaping Africa’s Economic Future’, said that the Nigerian economy is set to grow by 2.8 percent in 2023, down from 3.3 percent in 2022, and to rise slightly to an average annual rate of 3 percent in 2024–25.
According to the report, growth will continue to be driven by services, trade, construction, manufacturing, and agriculture. However, oil production is projected to remain subdued in 2023, because of inefficiencies and insecurity, and recover slightly in 2024– 25. On the production side, growth in 2023 will be supported by industry (with growth of 5.6 percent) with the mega-refinery project.
“Africa’s largest oil producer is not expected to reach a current account surplus in 2022. The country’s higher crude oil export revenues are more than offset by higher imports of refined petroleum products, lower remittances, and lower capital inflows,” the report said.
Nigeria’s petrol import bill hit N5.2 trillion in 2022, the highest in six years, as the quest by the country to wean itself off imported fuel drags. The country relies wholly on imports to meet its fuel needs, as its refineries have remained in disrepair for many years.
Data from the National Bureau of Statistics (NBS) showed Nigeria spent N5.2 trillion in 2022, N3.9 trillion in 2021, N1.9 trillion in 2020, N1.7 trillion in 2019, N2.1 trillion in 2018 and N1.7 trillion in 2017.
Last year, the Nigerian National Petroleum Company remitted nothing to the Central Bank of Nigeria from crude oil sales, mainly due to petrol imports.
Foreign capital inflows into the country have declined due to dwindling crude oil sales and generally poor and unstable export earnings. The value of capital imported into Africa’s biggest economy plunged to a six-year low of $5.33 billion last year from $23.99 billion in 2019, according to NBS.
According to the World Bank report, Nigeria’s projected current account deficit will remain at an average of 0.3 percent of Gross Domestic Product (GDP) in 2023–25 due to declining prices and stagnant oil production.
Despite oil prices trading at an average of $101 per barrel last year, the decline in oil production in 2022 exposed Nigeria’s fragile state, as real growth of the country’s oil GDP stood at -19.22 percent at the end of the year. Data from the NBS showed that the 2022 oil GDP is the lowest since 2015.
The nation in 2022 recorded an average daily oil production of 1.14 million barrels per day (bpd), the lowest since 1999, according to available records on the Organization of Petroleum Exporting Countries’ (OPEC) website.
According to experts, Nigeria’s 2022 oil GDP reflects the country’s inability to attract investments for active exploration and persistent operational issues that stymie oil production growth in Africa’s largest oil-producing country.
In addition, the country’s oil production recently fell by 2.9 percent due to pipeline vandalism and explosion, poor maintenance and shutdowns after rising for six months straight.
According to the World Bank report, Nigeria’s oil production picked up in late 2022, thanks to improved security that has prevented further oil theft. However, production remains below the OPEC+ quota.
Nigeria has also been unable to meet its OPEC quotas for months, which has shrunk dollar proceeds from oil sales.
Last week, OPEC and its allies unexpectedly announced additional cuts to oil production of over 1.16 million bpd. The cut raised oil prices from $74 per barrel to $85 per barrel. But analysts say Africa’s biggest oil producer is unlikely to see any gains if its crude oil output continues to dip.