The United Nations has cautioned that Nigeria faces a potential downturn in economic growth in 2024 due to its escalating debt, surging inflation rates, and their impact on citizens’ welfare. This insight was revealed in the World Economic Situation and Prospects report for 2024, released by the UN.
Notably, Nigeria’s inflation rate soared to 28.2 percent, coupled with a substantial increase in debt, rising from N49.85tn in the first quarter to about N87.38tn in the second quarter of 2023—a staggering 75.35 percent surge, as reported by the National Bureau of Statistics.
Despite these concerns, the UN report also anticipates a modest uptick in Nigeria’s growth rate, projecting an increase from 2.9 percent in 2023 to 3.1 percent in 2024. It credited some of this positive outlook to policy reforms introduced in 2023, particularly within the hydrocarbon sector, contributing to a more favorable Gross Domestic Product growth forecast of 3.1 percent for the country.
The World Economic Situation and Prospects report is a collaborative effort by the United Nations Department of Economic and Social Affairs, the United Nations Conference on Trade and Development, and the five United Nations Regional Commissions.
“Policy reforms enacted by the government of Nigeria in 2023, especially in the hydrocarbon sector, have contributed to a moderate improvement in the country’s growth prospects for 2024, with GDP growth forecast at 3.1 percent.
However, ballooning public debt, persistent inflation, and a rising cost of living, together with a weak business environment, will pose a downward risk to growth prospects,” the report stated.
The document also noted that efforts to boost local oil refining capacity would likely reduce domestic fuel costs in 2024 and beyond.
The UN report stated global trade remained low in 2023, with Africa representing part of the trend and virtually no year-on-year growth in merchandise trade volume in Africa in 2023.
The report predicted an improvement in Africa’s GDP growth in 2024, increasing to 3.5 percent on average, while externalities are projected to remain unfavorable for the African economies due to a weak global economic outlook and limited external financing opportunities.
“However, a recovery in domestic demand is projected for those countries that experienced economic shocks stemming from currency depreciations, electricity shortages, or armed conflict,” it added.
It further stated that while developed countries channel investments into sustainable sectors, developing countries struggle with capital flight and reduced foreign direct investment.
According to the document, international trade as a growth driver was losing steam, with global trade growth weakening to 0.6 percent in 2023, and projected to recover to 2.4 percent in 2024.
“Developing countries face challenges such as high external debt levels and rising interest rates, making access to international capital markets difficult. The decline in official development assistance and foreign direct investment for low-income countries contribute to debt sustainability challenges,” the document stated.
According to the report, tight financing conditions in international capital markets – deriving from the monetary policy stances of the United States Federal Reserve and the European Central Bank– limit external financing and refinancing opportunities for African economies.
“Consequently, African currencies – except the institutionally pegged CFA Franc – faced depreciation pressures due to weak export earnings and limited external financing inflows.
“While these deteriorating external conditions limited the scope for economic expansion, factors such as armed conflicts, political instabilities, extreme climate events, and infrastructure bottlenecks also depressed domestic demand growth.
“GDP growth in African economies is forecast to register moderate improvement in 2024, increasing to 3.5 percent on average,” the report pointed out.
The UN explained that efforts to promote stronger intra-regional trade in Africa, embedded most notably in the ongoing implementation of the African Continental Free Trade Area (AfCFTA), are yet to bear fruit.
“The effects of climate change continue to pose significant downward risks for the economy in Africa. Of the 68 climate-vulnerable countries that make up the Vulnerable 20 Group, 28 are African,” the report stressed.
“The exchange rate pass-through from substantial currency depreciations raised the domestic prices of imports and increased inflationary pressures. Moreover, high fuel prices resulted in higher transport costs, which were passed on to consumers in the form of higher local prices for essential items such as food.
“Food inflation remained elevated, above 30 percent, for some of the larger economies, including Nigeria, Egypt and Ghana. The member countries of the Central Bank of West African States and the Bank of Central African States, however, managed to keep their inflation rates substantially lower than those of other African economies,” it stated.
