Considering what the majority of world economies faced in 2022, the impact of the ongoing Russian-Ukraine war, and the disparity in growth between advanced, emerging, and developing economies, Nigerians should brace up for a roller-coaster ride in 2023.
A key aspect of the nation’s economy is the oil and gas sector. The country’s oil sector has been in recession since 2020; therefore, it has missed out on the opportunity of ramping up economic growth. Oil production in 2022 sank as a result of theft and vandalism, thereby disrupting Nigeria’s production in the oil and gas sector. In its aim to be forward-looking, the government is adopting a more hearts-and-minds strategy, by changing the security architecture that could see oil production recover lost grounds.
Additionally, the Dangote’s refinery is expected to be come on stream in 2023. This is going to be a significant development that will see improvement in production and should in turn bring about lower fuel imports, thereby stabilising the foreign exchange market.
Inflation has been on the high side for the past two years, and the pressure on the monetary base has had an upward shift in 2022. Following the CBN’s announcement in October about redesigning banknotes and the increase in MPR, a naira sell-off had been triggered. This is expected to stabilise the naira’s value and control the amount of money in circulation in 2023. If this leads to no devaluations in the naira in 2023; it would bring about a positive change in the average consumer price inflation.
The International Monetary Fund’s (IMF) World Economic Outlook (WEO) report showed Nigeria’s Gross Domestic Product (GDP) recording a growth of 2.7% in 2023.
Also, the World Bank’s forecast of Nigeria’s Gross Domestic Product (GDP) growth rate is put at 2.8% for 2023.
According to the IMF, less accommodative monetary policy in advanced economies will pose challenges for central banks and governments in emerging and developing markets. Higher returns elsewhere will incentivise capital to flow overseas, putting downward pressure on emerging market and developing economy currencies and raising inflation. Without commensurate tightening, this will increase the burden on foreign-currency borrowers, in public and private sectors. A tightening policy should also bring costs down, as domestic borrowers will find credit harder to achieve. Overall, tighter policies will likely be appropriate in many emerging markets and developing economies to stave off the threat of persistently higher inflation.