Nigeria in dire need of proactive economic growth for 2023

 

COMFORT EKELEME, Business Editor

 

As the 2023 financial year is gradually opening up, predictions on the performance of the economy have continued to emerge with experts saying the economy may not witness any remarkable improvement except the nation gets a government that will be ready to positively change the system.

 

No doubt, the Nigerian economic growth slowed in 2022 on the back of declining oil output and moderating non-oil activity.

 

It would be recalled that the latest figures from the National Bureau of Statistics (NBS) showed that economic growth slowed from 3.4 per cent Year on Year (y-o-y) in the second quarter (Q2), 2022 to 2.3 per cent y-o-y in Q3, 2022.

 

According to the report, the slowdown was mostly due to a poor performance in the oil sector, where the decline in output worsened from a fall of 11.1 per cent y-o-y in Q2, 2022 to 22.3 per cent y-o-y in Q3, 2022,” the report added.

 

Managing Director/ Chief Executive Officer, Maxifund Investment and Securities Plc, Mazi Okechukwu Unegbu in an interview with Daily Champion said, “I don’t see the economy improving anywhere, in fact the 2022 economy from my own prediction will be better than the 2023 economy. I have the facts and figures to show that that is what is going to happen.

 

“The Nigerian economy is not going to improve in 2023 except we get a government that will be ready to change the system. The present government is even not interested in working and changing the economy.

 

“So the 2022 economy will be better than the 2023 economy, unless there is miracle that will happen but I don’t see that miracle happening. The economies that are doing well know what they are doing. We must have to work in order to get this economy right. We must have to help ourselves, we can’t just stay and be expecting miracle to happen.

 

“Other countries that are doing well did not depend on the economy. We must have to work to get what we want to achieve. Without us working towards what we want to achieve, making sure our youths are brought up to believe they can achieve what they want with hard work,” he said.

 

Speaking further, Mazi Unegbu maintained that the government must make the environment conducive for businesses to thrive, adding that Nigerian youths are intelligent.

 

He said, “If they are given the right environment, they will really achieve all they want to achieve, otherwise, I don’t see how the economy can grow.

 

Unegbu further emphasized on the need for managers of the economy to encourage the youths and make the environment conducive and attractive for growth.

 

Also speaking, a former President, Association of National Accountants of Nigeria (ANAN), Dr. Samuel Nzekwe recalled that the year 2022 began with Russia-Ukraine conflict which affected the entire world economy.

According to him, being one of the major providers of grains, it became very difficult to provide steady food in the world.

 

“Price of food went up, price of fuel went up and people were not able to get enough power to manufacture. The Nigerian economy was greatly hit by the volatility in the world. Effect of insecurity, flood disaster, all these impacted the economy so badly,” he said.

 

Moving forward, Dr. Nzekwe maintained that there is need for the federal government to create enabling environment for private sector to thrive.

On the issues around power, he said there is need for the government to be serious in this country about this fuel matter.

 

He said, “Every day they talk about subsidy, I don’t even know if there is subsidy or not, I don’t know what they are referring to as subsidy, is it high exchange rate we are seeing now? I believe that if we have modular refineries, under a serious government policy, we can produce fuel that we can consume,” Nzekwe said.

 

Meanwhile, the Chief Executive Officer, Cowry Asset Management, Mr. Johnson Chukwu said the 2023 budget was about 4.3 per cent deficit of Nigeria’s Gross Domestic Product (GDP), adding that such budget deficit may plunge Nigeria into huge borrowing capable of creating economic setback for the country.

He said Nigeria was already indebted to other countries and that the budget deficit would make Nigeria to continue to borrow in order to service her debts.

 

According to him, “Government spends so much on capital expenditure, and my worry is that if government has to borrow for every capital expenditure, then it will be economic wise for government to outsource capital expenditure to the private sector.

 

He blamed the three arms of government, the executive, the legislative and the judiciary, for not putting enough checks and balancing in place that will guide government excessive borrowing.

 

A Fitch Solutions Country Risk & Industry Research report also predicted that the Nigerian economy will continue to slump in 2023 due to activities leading to the general elections, but would likely pick in 2024, with growth rising to 3.3 per cent.

 

An affiliate of Fitch Ratings, the Fitch Solutions report estimated that economic growth in Nigeria slipped to a six-quarter low of 2.3 per cent  in quarter four of 2022, predicting that the country’s economic growth would ease further in 2023.

 

The Fitch Solution said, “We expect that the country’s economy will expand by just 2.5 per cent due to disruptions associated with the February 2023 election and the continued decline of oil production. Growth will accelerate to 3.3 per cent in 2024 as oil output picks up.

“Economic growth in Nigeria slipped to a six-quarter low in Q3, 2022, and we expect that it will continue to slow over the coming two quarters,” it added.

 

Also, the report noted that growth in the agricultural and retail sectors have picked. “We expect growth of just 2.7 per cent in 2022 (a slight revision from our previous forecast of 3.0 per cent and 2.5 per cent in 2023.

 

There are two major reasons for this continued slowdown, it stated, pointing out that first, it expects that the oil sector, which has been a key drag on growth in recent years will continue to struggle in 2023.

 

“At Fitch Solutions, our oil and gas team estimates that Nigerian crude oil production will fall by 15.2 per cent in 2022 and by another 14.9 per cent in 2023,” the forecast noted.

 

The contraction, it said, is being driven by unplanned outages at onshore production facilities, a deteriorating security situation, and the lagged effect of years of underinvestment. “In 2024, however, we expect that production will essentially stabilize.

 

This turnaround, it explained, would be driven by increased offshore oil production, which will help to offset problems in the onshore sector.

 

“Indeed, this is the key reason why we expect that growth will pick up from 2.5 per cent in 2023 to 3.3 per cent in 2024,” it stressed.

 

On a second note, Fitch said it expects that disruptions associated with the February 2023 general election will create another headwind.

 

“Campaigning will prevent some economic activity, while government policymaking will essentially shut down,” it predicted.

 

While trend growth will be slower heading into the 2023 vote, Fitch noted that it still expects that growth will slow from 2.0 per cent in Q4, 2022 to 1.5 per cent in Q1, 2023.

 

“The hit to economic activity would, of course, be much larger if the election sparks large-scale protests or violence,” it stressed.

 

On a balance of factors, the International Monetary Fund (IMF) expects global economic growth to slow to 2.7per cent year on year in 2023 Full Year, down from an expected 3.2 per cent year on year growth rate in 2022.

 

Similarly, an analyst had maintained that there is the need for a complete removal of the subsidy on Petrol Motor Spirit (PMS), adding that the potential removal of fuel subsidy would reduce hard-currency demand but could fan inflation even higher, keeping the naira under pressure.

 

Also, they maintained that the fiscal authorities need to come to terms with the fact that solving the lingering elevated price pressures rests more on them, given that supply constraints primarily drive the current consumer price increases.

 

“Aside from looking at the GDP expectation using our estimates for performance across the different sectors of the economy, we think 2023 FY growth will be undermined by the impact of some monetary and fiscal decisions undertaken in 2022.

 

“For 2023, we believe Nigerian banks will maintain their growth trajectory supported by core income, owing to higher loans and investment securities yields. Although, we think banks will be cautious about growing loans domestically in 2023 as the tight monetary conditions will likely limit risk asset creation,” the analyst said.