According to a new World Bank analysis, Nigeria’s economic development in 2023 is at risk of being unstable due to reduced oil production and the new administration’s numerous policy issues.
The Nigerian economy is expected to increase by 2.8 percent in 2023, down from 3.3 percent in 2022, and to rise slightly to an average annual rate of 3 percent in 2024–25, according to the new report, “Africa’s Pulse: An Analysis of Issues Shaping Africa’s Economic Future.”
The analysis predicts that services, commerce, construction, manufacturing, and agriculture will continue to be the main drivers of growth. However, due to inefficiency and security concerns, it is anticipated that oil output would stay muted in 2023 before marginally increasing in 2024–25.
On the production side, growth in 2023 will be supported by industry (with growth of 5.6 percent) with the mega-refinery project.
“Africa’s largest oil producer is not expected to reach a current account surplus in 2022. The country’s higher crude oil export revenues are more than offset by higher imports of refined petroleum products, lower remittances, and lower capital inflows,” the report said.
As the country’s effort to wean itself off imported fuel continues on, Nigeria’s petrol import bill reached N5.2 trillion in 2022, the most in six years. Since its refineries have been in poor condition for a long time, the nation completely depends on imports to cover its fuel demands
Nigerian expenditures were N5.2 trillion in 2022, N3.9 trillion in 2021, N1.9 trillion in 2020, N1.7 trillion in 2019, N2.1 trillion in 2018, and N1.7 trillion in 2017.
Due mostly to the importation of gasoline, the Nigerian National Petroleum Company did not send any revenue from the sale of crude oil to the Central Bank of Nigeria in 2017.
The country’s foreign capital inflows have decreased as a result of falling crude oil sales and usually subpar and inconsistent export revenues. According to NBS, the amount of capital imported into the largest economy in Africa fell to a six-year low of $5.33 billion last year from $23.99 billion in 2019.
In 2023–25, Nigeria’s current account deficit is expected to average 0.3 percent of GDP due to sluggish oil production and falling oil prices, according to a World Bank research.
Despite oil prices trading at an average of $101 per barrel last year, the decline in oil production in 2022 exposed Nigeria’s fragile state, as real growth of the country’s oil GDP stood at -19.22 percent at the end of the year. Data from the NBS showed that the 2022 oil GDP is the lowest since 2015.
According to data on the Organization of Petroleum Exporting Countries (OPEC) website, the country’s average daily oil production in 2022 was 1.14 million barrels per day (bpd), which was the lowest level since 1999.
Experts claim that Nigeria’s oil GDP for 2022 indicates the nation’s incapacity to draw investments for active exploration and ongoing operational problems that impede the increase of oil production in Africa’s largest oil-producing nation.
In addition, after increasing for six consecutive months, the nation’s oil production recently decreased by 2.9 percent as a result of pipeline explosions, vandalism, inadequate maintenance, and shutdowns.
Nigeria’s oil production increased in late 2022 as a result of enhanced security that stopped additional oil theft, according to a World Bank report. Production, though, continues to be below the OPEC+ quota.
Additionally, Nigeria has been unable to fulfill its OPEC quotas for months, which has reduced the country’s dollar earnings from oil sales.
In an unexpected move last week, OPEC and its allies reduced oil production by almost 1.16 million bpd. Oil prices increased due to the cut, going from $74 per barrel to $85 per barrel. However, analysts assert that if its crude oil output keeps declining, Africa’s largest oil producer is unlikely to experience any advantages.
