Economic growth in Nigeria this 2023 is expected to be at 3 percent., dropping from last year’s 3.2 percent. This follows a pattern of the last three years. Growth rate was at 3.6% in 2021. It dropped to 3.2% last year 2022 and will further drop by 0.2% to remain at 3.0% this year. This is somehow still on a positive growth trajectory. This is far ahead of South Africa whose economic growth dropped from 2.1% in 2022 to 1.1% this year.
In terms of fiscal, Monetary Policies, there is need for some rejigging. And the roles of go-getters, major stakeholders within the command post of the economy is critical to Nigeria’s success this year 2023. The key players here include policy makers, especially those in the ministry of finance and the governor of the Central Bank, Then come movers and shakers of the economy such as Aliko Dangote, Oba Otudeko, Abudlsamad Rabiu. Mike Adenuga,Tony Elumelu and others.
It is this crop of go-getters that Nigeria needs now to rescue the economy from going into recession. The in-coming administration, after May 29th, will need them so much to help in organizing a reboot of the economy, freeing it from the rot that is getting messier everyday. They have the wherewithal and courage to organise the clean-up in a way that will free the population from the pain, hopelessness and anger standing between them and a new beginning.
Of course, it is a fact that the link between President Muhammadu Buhari’s government and the incoming administration, that will succeed him with the February 25th polls, is the 2023 federal budget. Against this background, the budget focuses on maintaining fiscal viability and ensuring a smooth transition to the incoming administration. The proposed 2023 federal government budget implies a general government fiscal deficit of about 6 percent in 2023 compared to an estimated 6 percent in 2022.
As at now, the Nigerian economy is ailing. The indicators are not very encouraging. Nigeria’s N21.83tn 2023 federal budget has about N12tn deficit component. The capital expenditure component of it is about N6.4trillion while debt service will swallow N6.3trillion.
At the same time, multidimensional poverty is plaguing the country, putting 133 million Nigerians below the poverty line according to the National Bureau of Statistics. The unemployment figure stands at over 33 percent as many micro, small, and medium enterprises (SMEs) groan under the heavy cost of doing business. The mortality rate of many businesses in Nigeria is high, largely due to the high cost of energy (electricity and petroleum products insecurity, and lack of adequate infrastructure as well as the government’s policy summersault.
With the high cost of fuel importation and a weak Naira, it is possible that the petrol subsidy will be removed in the second half of 2023. According to government sources, trillions of naira being spent to subsidize the cost of imported refined fuel can best be deployed to improve social services and infrastructure. Within the course of the year, if this is done, there is bound to be a rise in commodity prices, and this can lead to social unrest unless cleverly managed.
However, if those at the levers of policy-making and those in the forefront of economic power in Nigeria put in their best and harmonize things together, Nigeria can sustain its projected growth rate this 2023 without plunging into recession, predicted to assail a third of the countries of the world by both the World Bank and the International Monetary Funds (IMF).
So as President Muhammadu Buhari and his cabinet bow out in April, there are expectations that a new Nigerian economy will be unveiled when all the contending issues will be treated. These include the deregulation of the petroleum downstream sector; consolidation of the power sector reform; prioritisation of infrastructure financing, resetting of the monetary policy, resolution of the foreign exchange market crisis, and fight against corruption and policies that will aid employment generation.
Within the oil industry, issues to be tackled include the twin challenges of low crude oil production and oil theft. And within the economy generally, deregulation of the petroleum downstream sector, and the pending reforms in sectors like telecoms, aviation, capital market, insurance and Micro, Small and Medium Enterprises are of essence.
NNPC/Dangote Refinery
Amid the confusion in the petroleum industry and the perennial fuel scarcity, expectations are rife that with the coming onstream of the Dangote Refinery, especially in the first quarter of the year, Nigeria will heave a sigh of relief given the reality that a private refinery will be run profitably and efficiently.
Reports said that the Dangote Refinery is nearing completion as pre-commissioning tests reach concluding stages making a launch date in the first quarter of 2023 feasible.
Sources close to the company’s plans said the refinery, billed as the largest single-train refinery in the world with a capacity to process 650,000 barrels per day could see the first refining runs begin as early as March.
The integrated refinery and petrochemical complex in the Lekki Free Zone near Lagos, Nigeria, will produce Euro-V quality gasoline and diesel, as well as jet fuel and polypropylene and will likely generate 4,000 direct and 145,000 indirect jobs.
It is expected to double Nigeria’s refining capacity and help in meeting the increasing demand for refined petroleum products while providing cost and foreign exchange savings. It is estimated to have an annual refining capacity of 10.4 million tonnes of petrol.
On the other hand, the Nigerian National Petroleum Company Limited, on behalf of the federal government, controls four refineries which include: the Kaduna Refining and Petrochemical Company, Warri Refining and Petrochemical Company, and Port Harcourt Refining Company.
In the face of poor performance and huge overheads, experts say fixing Nigeria’s unprofitable refineries to functional capacity has remained a pipe dream since 1999.
Banking sector
Overwhelming pattern across Nigeria would seem to suggest a readiness of some banks to maximize Nigeria’s promise of greatness and support more the real sector. A slew of events is expected to determine in the economy this year. Whether most banks will play a growing emboldening of the business landscape is another thing, but certainly some of them
Telecom Sector in 2023
The telecom sector will perform optimally this year. This is the verdict of the Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), Mr. Gbenga Adebayo, He said Fintech and Data Application will be the major drivers of the economy in 2023.
According to him, there will be increased data analytics that will inform major decision-making in 2023, driven by increased data application. He said Fintech would get more support from telecom operators in 2023 which would enable them to develop more solutions that would further support financial transactions across the board.
This is quite possible when one looks at the gains of the telecom sector and how it positively impacted the Nigerian economy in 2022 in the areas of GDP growth, broadband penetration, and Fintech growth.
Capital market Investors
Most listed banks, Fast Moving Consumer Goods (FMCG), and cement manufacturing companies will announce impressive performances in continuation of the 2022 performance that has attracted increased trading on the bourse.
As the inflation rate currently at 21.47 percent as of November has eroded investment, the pension fund administrators, and retail investors have increased their investment in fundamentals stocks and at the same time divest to fixed-income securities in a move to gain attractive yield on their investment above the inflation rate.
The trend, according to analysts will continue in 2023 as investors’ shift might thrust the stock market into negative territory in the first quarter of the year when Independent National Electoral Commission (INEC) will conduct the general elections.
The Chief Managing Director, of Highcap Securities Limited, Mr. David Adnori said, “With the expectation of relatively high yields in the fixed income market, especially in the first half of 2023, most investors are expected to patronise the bonds market more.
Equally, analysts at Cordros securities forecasted interest rates domestically to remain high over 2023. According to them, “At the same time, we expect currency pressures to persist in the absence of any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels.”
Naira Exchange Rate and Inflation
The USD to Naira Exchange Rate experienced a sharp rise last year, and Nigeria’s CPI changes have been harsh. Since supply chain disruptions in developed countries have triggered global inflation, there is cause for concern within the Nigerian economic landscape. As the downward pressure on the Nigerian economy increases, it is imperative to stabilize growth. The combination of exchange rate depreciation of the Naira and imported inflation has aroused many concerns.
The nominal effective exchange rate trend of the Naira has high correlation with Nigeria’s CPI and has a tendency to gradually strengthen, while the correlation with PPI and import and export prices is higher.
In the one-way transmission mechanism, the exchange rate can, directly and indirectly, affect Nigeria’s consumer prices. Due to the relatively high proportion of import consumption in the country, the direct impact of the exchange rate on the Consumer Price Index is quite high. Therefore, it is mainly based on direct transmission and cost promotion.
However, whether the transmission is smooth or not is still affected by economic expectations and monetary environments.
The state of the economy, not the exchange rate, is the most important factor affecting the CPI in Nigeria. Therefore, the government should do a good job of stabilizing the supply of commodities and monitoring market prices to help alleviate the concerns of further inflation outbreaks, while also stabilizing monetary policy expectations and strengthening market confidence.
Experts say Nigeria can sustain its projected growth rate without plunging into recession, with all hands being on deck .
To Dr. Muda Yusuf- the Director of the Centre for the Promotion of Private Enterprise, political environment will have much to do with the economy this 2023. He is of the view that the quality of the transition programme will determine the quality of the leaders to be elected. According Dr Yusuf, this is why the current administration must ensure that people’s votes count on election day.
He maintains that “the political environment has a major impact on economic and business performance. Therefore, the quality of the political transition process, especially the credibility of the 2023 elections would be of contextual significance for the economy in 2023. The elections must be free, fair, transparent and credible. “And it must be seen to be so. This underlines the need for the independence, neutrality and credibility of the key institutions involved in the election management process – INEC, the Judiciary and the security agencies. The quality of the democratic transition and choices would significantly impact economic outcomes in 2023.”
To Prof. Omowumi Iledare, petroluem subsidy payment is part of the woes of this country, as it is linked to foreign exchange problem. .A professor of Energy Economics and past President, Nigeria Association of Energy Economics, Prof. Iledare, insists on the need for stopping subsidy. He said Nigerians cannot afford to burn public funds on the tail pipe of cars.
“Subsidy will collapse the Nigerian economy and it is already doing it. When you are spending one trillion naira a year over 10 years to subsidize petrol consumption, not for economic sustainability, then you cannot survive it.”.
He adds that a general government deficit of this magnitude would entail additional central bank financing given the difficult external environment and the need to limit crowding out of the private sector. According to him, “Macroeconomic trade-offs imply that when inflationary pressures are high as is the case in Nigeria, fiscal policy should protect the most vulnerable while pursuing a tightening stance to avoid overburdening monetary policy in the fight against inflation.
For the in-coming administration, there is a need for political commitment at the highest level and broad buy-in from stakeholders is crucial to improving revenue collection.
What is critical for the government is that the economy must be diversified and the oil revenue projections in the 2023 fiscal appropriation must be met for the economy.
Next is the need to redesign the existing tax policy to favour growth-enhancing activities. The government also need to assess the effectiveness of existing fiscal incentives. Efforts to design more progressive tax systems and boost tax collection — particularly, property and/or land taxes — will surely help. This will have to be combined with increasing the VAT rate, streamlining existing VAT exemptions, and increasing existing excise rates on alcoholic and tobacco products.
As the two major monetary policies introduced last year take effect this January, analysts believe the current administration has begun to position the economy for the needed reforms. These are the Naira redesign and the withdrawal limit, which seek to checkmate the activities of currency dealers, criminally minded individuals who indulge in kidnapping and robberies as well as politicians who engage in vote buying.
Much is also expected in the foreign exchange sector as more dollars are expected to be generated by enhanced non-oil sector activities and the anticipated commencement of the Dangote Refinery. Then inflation must be anchored while the problem of foreign exchange should be significantly tackled when the Dangote refinery goes into operation, helping Nigeria to do away with using huge foreign exchange on importation of refined petroleum products.
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