Agusto & Co, Pan-African credit rating agency, projects three percent economic growth for Nigeria in 2023.
The agency’s projection is contained in its recently released report titled ‘2023 Outlook: Nigeria, a Nation on the Precipice’.
This projection is higher than the 2.9 percent growth estimated by the World Bank but lower than the International Monetary Fund (IMF’s) 3.2 percent.
“Agusto & Co has a slightly more optimistic forecast, at 3%, and believes GDP growth will be supported by election spending, improved oil output (to 1.3-1.4mbpd) and still high oil prices ($88pb) but will be constrained by low investment and productivity,” the report reads.
“How quickly Nigeria can stem rampant oil theft and vandalism will be crucial to boosting foreign exchange earnings and providing the CBN with enough ammunition to intensify its interventions in the forex market.
“However, we expect high global interest rates to continue to limit capital inflows and add to currency pressures in 2023.”
The agency said that Nigeria’s insecurity challenge is expected to continue to be a major issue in 2023.
It said the problem would require a two-pronged approach – deploying resources to military artillery, personnel and intelligence; while also confronting the more deep-seated problems of pervasive poverty, high unemployment and extreme levels of inequality.
NAIRA LIKELY TO APPRECIATE TO ₦650/$ AT PARALLEL MARKET
In the report, Agusto said that all three leading presidential candidates, on the surface, appear willing to ‘allow’ for a more market-determined exchange rate.
It said a successful election would ease frayed nerves and bolster investor confidence.
The agency forecasted a gradual downward adjustment of the official exchange rate to ₦480-₦500/$ and a simultaneous increase in FX supply, which would signal a willingness to shift ground and would likely trigger an appreciation of the naira in the parallel market to ₦650-₦680/$.
INFLATION TO DROP TO BETWEEN I5% and 17%
Agusto projected that inflation would reduce in 2023 to 15 percent-17 percent because of the Central Bank of Nigeria’s monetary policy pragmatism as well as the easing of global commodity prices from their peak in 2022.
“This is despite the impact of predicted floods and widespread insecurity on food production, as well as elevated energy prices, election-related spending, exchange rate pressures, and cost-reflective rates (petrol and electricity),” the agency said.
PETROL SUBSIDY PAYMENTS TO GULP ₦5TRN IN 2023
Agusto forecasted that Nigeria’s total subsidy bill would reach ₦5 trillion in 2023, thereby limiting expenditure on crucial infrastructure needed to galvanise economic growth in the medium to long term.
It said that doing away with subsidy would be inflationary and is likely to trigger severe backlash from unions and many sections of the wider public.
It, however, encouraged the outgoing administration to eliminate subsidy as it would make way for further and more fundamental fiscal reforms.
