The World Bank has projected that Nigeria’s per capita income will return to its pre-pandemic level by 2025.
This outlook comes as the country’s economy is expected to witness a gradual improvement in the coming years, according to the bank’s Global Economic Prospects report for January 2024.
The Sub-Saharan African (SSA) region, including Nigeria, experienced a slowdown in economic growth to an estimated 2.9 per cent in 2023, primarily due to country-specific challenges such as higher input prices for businesses in Nigeria.
The region’s three largest economies – Nigeria, South Africa, and Angola – saw their growth rate slow to an average of 1.8 per cent in 2023.
The Sub-Saharan Africa (SSA) region, where Nigeria is the largest economy, experienced a deceleration in growth to an estimated 2.9% in 2023, lower than the earlier projection.
Nigeria’s growth in 2023 softened to an estimated 2.9 per cent, influenced by various factors including services growth weakening due to a disruptive currency demonetization policy.
However, there was an increase in annual oil production after previous years’ decline.
Looking forward, Nigeria’s economic growth is projected at 3.3 per cent for 2024 and 3.7 per cent for 2025. These projections are 0.3 and 0.6- per cent points higher than previous estimates made in June last year.
This improvement is expected due to the gradual impact of macro-fiscal reforms initiated by the government.
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Key reforms have included removing the gasoline subsidy and unifying the exchange rate, which, despite causing short-term challenges, are deemed necessary for long-term economic stability and growth.
Growth in the coming years is expected to be driven by sectors like agriculture, construction, services, and trade.
Moreover, inflation is projected to ease gradually as the effects of last year’s exchange rate reforms and the removal of fuel subsidies fade away.
The report read: “Growth in Nigeria is projected at 3.3 percent this year and 3.7 percent in 2025—up 0.3 and 0.6 percentage points, respectively, since June—as macro-fiscal reforms gradually bear fruits. The baseline forecast implies that per capita income will reach its pre-pandemic level only in 2025.
“Growth is expected to be driven mainly by agriculture, construction, services, and trade. Inflation should gradually ease as the effects of last year’s exchange rate reforms and removal of fuel subsidies fade. These structural reforms are expected to boost fiscal revenue over the forecast period.”
However, it is important to note that while the World Bank’s report is optimistic about Nigeria’s economic growth and per capita income returning to pre-pandemic levels by 2025, this recovery is contingent on the successful implementation and continuation of the current reform momentum.
The World Bank’s projection on per capita income is similar to a projection by an analyst at the global investment bank Morgan Stanley, who said the reforms made by the current president of Nigeria, Bola Tinubu, may lead to a strong increase in annual income despite the challenge they pose for economic growth. (Source: nairametrics)
