The report said growth will continue to be driven by services, trade, construction, manufacturing, and agriculture.
The Nigerian economy is set to grow by 2.8 per cent in 2023, down from 3.3 per cent in 2022, the World Bank has said.
The bank, in its Africa Pulse Report April 2023 edition titled “Leveraging resource wealth during the low carbon transition” said the economic growth is expected to accelerate slightly to an average annual rate of 3 per cent in 2024–25.
This, it said, translates into growth per capita of 0.2 per cent in 2023 and 0.4 per cent in 2024–25, which is insufficient to reduce extreme poverty in the country.
“Growth will continue to be driven by services, trade, construction, manufacturing, and agriculture.
“Oil production is projected to remain subdued in 2023, because of inefficiencies and insecurity, and recover slightly in 2024–25,” it said.
On the production side, the report added that growth in 2023 will be supported by industry (with a growth of 5.6 per cent) with the mega-refinery project.
The report said the economic performance of Sub-Saharan Africa is not uniform across subregions and countries.
It explained that the real gross domestic product (GDP) growth of the Western and Central Africa (AFW) subregion is estimated to decline to 3.4 per cent in 2023, from 3.7 per cent in 2022, while that of Eastern and Southern Africa (AFE) declines to 3.0 per cent in 2023, from 3.5 per cent in 2022.
“The region’s performance is still dragged down by lower growth of the largest countries in the continent.
“Economic activity in South Africa is set to weaken further in 2023 (0.5 per cent) as the energy crisis deepens, while the growth recovery in Nigeria for 2023 (2.8 per cent) is still fragile as oil production remains subdued and the new administration faces many policy challenges,” it said.
This outlook, the report said, poses challenges to policymakers in the region who seek to accelerate the post-pandemic recovery, reduce poverty, and put the economy on a sustainable growth path.
According to the report Sub-Saharan Africa faces a myriad of challenges to regain its growth momentum.
It said one of these challenges is to overcome the protracted slowdown of growth of investment in the region.
“Investment growth in Sub-Saharan Africa fell from 6.8 per cent in 2010–13 to 1.6 per cent in 2021, with a sharper slowdown in AFE than AFW.
“Amid the economic fallout of the pandemic and the war in Ukraine, investment growth is expected to remain modest and below the average growth rate of an investment over the past two decades, not only in Sub-Saharan Africa but also in other emerging markets and less developed economies,” the report said.
It noted that the sharp deceleration of investment growth has been broad-based across the subregions, resource-abundant and resource-scarce countries, and types of investors (public, private, and foreign).
“Oil-abundant countries in the region have experienced the largest and more persistent downswing in investment, as opposed to non-resource-abundant countries, which exhibit a more subdued decline in investment.
“Rates of public, private, and foreign investment growth have remained below their long-term averages for most years in the past decade. While
domestic private investment showed a modest decline over time, foreign direct investment experienced a contraction during 2016–21,” it said.
By contrast, it said remittances remained resilient to the various shocks over the past decade—including the pandemic.
According to the report, slower investment growth in Sub-Saharan Africa is holding back long-term growth of output and per capita income, as well as progress toward achievement of the Sustainable Development Goals.
It added that differences in the strength of the recovery across subregions and countries are partly related to differences in the growth of investment.
“Weak investment growth adds to macro-fiscal pressures, amid substantial financing needs, limited fiscal space, and rising borrowing costs.
“Consumer price inflation in Sub-Saharan Africa accelerated sharply and hit a 14-year record high in 2022 (9.2 per cent), fueled by rising food and energy prices as well as weaker currencies,” the report said.
The report noted that domestic food prices have remained high despite the gradual decline in world food prices.
“Weaker currencies and higher input costs (transport fuels and fertilizers) explain the stickiness of food prices. Climate shocks, especially in the Horn of Africa, add inflationary pressures from the supply side.”
The bank added that the number of countries with two-digit average annual rates of inflation increased from 9 in 2021 to 21 in 2022.
However, the report said a slowdown in aggregate demand, declining commodity prices, and the effects of the monetary policy tightening across the continent will lower inflation in the region to 7.5 per cent in 2023, and further to 5.0 per cent in 2024.
Additionally, it said the number of countries with two-digit inflation is expected to drop to 12 in 2023.
“Although headline inflation appears to have peaked in the past year, inflation is set to remain high and above central bank target bands for all countries with an explicit nominal anchor in 2023.
“Inflation rates remain high and above targets despite the early and sizable interest rate hikes undertaken by African central banks. For instance, the monetary authorities in Ghana, Mozambique, Nigeria, South Africa, and Uganda, among others, raised their monetary policy rates swiftly to record highs over the past two years,” it said.