The Nigerian Economic Summit Group (NESG) forecasts that due to inadequate performance in the job-elastic industries, the unemployment rate will likely rise to 37% and the population living in poverty will rise to 45%.
In its most recent macroeconomic outlook, the Group stated that a combination of low labor absorption in growth-promoting industries and population increase estimated at 3.2% would result in a drop in real per capita income.
In a similar vein, the World Bank has stated that the nation must make investments in human capital, put the required infrastructure in place, address insecurity, and empower the private sector to grow and create more jobs.
The World Bank predicted that no nation would ever achieve shared prosperity without implementing these.
Dr. Shubham Chaudhuri, the World Bank’s Country Director for Nigeria, made this statement yesterday during the introduction of the NESG 2023 Macroeconomic Outlook Report.
When discussing the problems Nigerians face from a macroeconomic standpoint, Chaudhuri recommended the Federal Government to exercise restraint in its spending.
Dr. Olusegun Omisakin, Head of Research and Chief Economist at NESG, gave an outlook for the year in which he stated that real GDP growth is anticipated to moderate to 2.98 percent, with economic growth expected to be muted in 2023 due to pressures on investment and low productivity in crucial sectors.
He said that the services sector will be the main driver of economic growth, but added that this increase would not be sufficient to create a large number of employment.
As a result, he predicted that unemployment will not decrease, even though election-related expenditure and an increase in the oil industry will promote economic growth.
Additionally, he stated that in 2023, the average inflation rate is predicted to be 20.5%.
According to him, structural, financial, and monetary variables would continue to fuel inflationary pressure, which is projected to remain high.
According to him, food inflation would continue to be the main cause of inflation because of the long-lasting effects of flooding, higher production costs brought on by rising borrowing costs, insecurity, and relocation.
The economist predicted that essential components, particularly transportation, will continue to rise as a result of current fuel shortages and the elimination of fuel subsidies.
It should be noted that the 2023 prediction implies that the price of crude oil would average $85 per barrel.
“This suggests that the effect of the Russia-Ukraine crisis on the energy market will remain subdued and that elevated demand for crude oil will sustain prices at a level relatively higher than the US$70/barrel proposed in the 2023 budget,” he said.
He insisted that crude oil production in Nigeria would average 1.35 million barrels per day (mbpd) in 2023 despite increased efforts to stop crude oil theft.
“This represents an improvement over 1.15mbpd in 2022 but is 20 percent lower than the 2023 budgetary oil production of 1.69mbpd. The outcome is an improvement in government capital expenditure to N2.35 trillion representing a budget implementation rate of 43.9 percent,” he said.
In regards to the budget, he noted that the Federal Government’s 2023 plan appeared to be rather ambitious, especially given that oil revenue is still declining and that there is no sign of a resolution to the sector’s issues.
He said that the government is not slowing down on borrowing despite growing worries about the state of the national debt.
The prognosis indicated that the fiscal deficit and the nation’s debt will increase further if gasoline subsidies were not eliminated in 2023.
According to the view, the government has increased expenditure to help the economy in the 2023 budget, but unlike other budgets, this one does not outline how it plans to boost growth, employment, or control inflation.
Using N435.57 to one dollar as the benchmark exchange rate, he continued, is also unfair to the government.
Taiwo Ayodele, a panelist from PwC and fiscal policy partner and Africa tax leader, bemoaned the lack of cooperation between the monetary and fiscal branches of the government.
He outlined steps for Nigeria to attain shared prosperity, including harmonisation, data collection, and efficient policy coordination.
“In the budget for 2023, 63 MDAs are generating revenue, yet the money is not getting to the government. Harmonisation is an issue, second is using data for intelligence. Economic activities are centred on government one-way or the other, but we are not connecting the dots.”
“Also for the government to do effective policy coordination, we need to remove the impediments for people trying to raise finance through the capital market. These are enablers to finance prosperity, to show that the government becomes creative on how they finance not only bonds, but also to ensure they look at equities in finance and also listing of government entities in the capital market,” he said.