The International Monetary Fund (IMF) has revised its forecast for Nigeria’s economic growth, projecting a slowdown in 2024. In its July 2024 World Economic Outlook, released on Tuesday, the IMF downgraded Nigeria’s growth forecast to 3.1 percent from the previously projected 3.3 percent in April. This adjustment reflects a 0.2 percentage point reduction from the prior forecast.
The IMF attributed the downgrade to lower-than-expected economic activity in the first quarter (Q1) of 2024. Despite this reduction, the IMF maintained its forecast for Nigeria’s economic growth at 3.0 percent for 2025, indicating a stable but modest growth outlook for the country.
Sub-Saharan Africa’s Economic Outlook
Tekedia Mini-MBA edition 15 (Sept 9 – Dec 7, 2024) has started registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
In addition to Nigeria, the IMF also revised its forecast for economic growth in the broader sub-Saharan Africa region. The growth forecast for the region in 2024 has been adjusted downward to 3.7 percent from the 3.8 percent projected in April. This revision is closely tied to Nigeria’s economic performance, as the IMF noted that the weaker-than-expected activity in Nigeria’s first quarter significantly impacted the regional forecast.
However, there is a positive note for the future. The IMF increased its forecast for economic growth in sub-Saharan Africa for 2025 to 4.1 percent, up from the April projection of 4.0 percent. This upward revision suggests a more optimistic outlook for the region in the medium term.
Global Economic Projections
Globally, the IMF retained its growth forecast, projecting stable economic growth rates of 3.2 percent in 2024 and 3.3 percent in 2025. The global economic outlook remains broadly unchanged from the April projections, reflecting a steady global economic environment.
For advanced economies, the IMF expects growth to converge over the coming quarters. In the United States, the growth projection for 2024 has been revised downward to 2.6 percent, a 0.1 percentage point reduction from the April forecast. This adjustment is due to a slower-than-expected start to the year. Looking ahead, the IMF anticipates U.S. growth to slow to 1.9 percent in 2025 as the labor market cools and consumption moderates, with fiscal policy beginning to tighten gradually.
By the end of 2025, U.S. growth is projected to align with potential, closing the positive output gap.
Global Inflation Trends
On the inflation front, the IMF forecasts a continued decline in global inflation. In advanced economies, the pace of disinflation is expected to slow in 2024 and 2025. The IMF attributes this slower pace to persistent inflation in service prices and higher commodity prices. However, the gradual cooling of labor markets, coupled with an expected decline in energy prices, should bring headline inflation back to target by the end of 2025.
For emerging markets and developing economies, the IMF predicts that inflation will remain higher and drop more slowly than in advanced economies. Despite this, inflation in these economies is already nearing pre-pandemic levels, partly due to falling energy prices.
Implications for Nigeria and Sub-Saharan Africa
The revised forecasts for Nigeria and sub-Saharan Africa highlight several key challenges and opportunities for the region. The downgraded growth forecast for Nigeria in 2024 underscores the need for robust economic policies and reforms to stimulate growth and address structural issues within the economy.
The potential for increased growth in 2025, both for Nigeria and sub-Saharan Africa, suggests that with the right policy measures, the region can achieve significant economic improvements. Key areas of focus should include enhancing infrastructure, improving governance, and fostering a conducive environment for investment and private sector development.
Nigeria’s Economic Challenges and Government Response
The revised projection is an indication that the Nigerian government under President Bola Tinubu is yet to come up with a clear economic plan that effectively addresses the current challenges. Inflation has continued to rise, particularly food inflation, which has hit 41 percent, pushing many Nigerians to the edge.
The government’s most effective approach so far has been to distribute food, but this measure has only reached a few among the millions of hungry Nigerians. Economists warn that this approach could further stoke inflation, as it means mopping up scarce food supplies from the markets.
The IMF’s downgrade signals that more comprehensive and effective economic strategies are needed to address Nigeria’s structural problems. These issues include high unemployment rates, a volatile exchange rate, and inadequate infrastructure. The Nigerian government has been advised to urgently implement policies that promote sustainable growth and economic stability.