IMF sees Nigeria's growth at 3.2% in 2023

Nigeria's economic growth is expected to face challenges in the coming year, with the International Monetary Fund (IMF) projecting a growth rate of 3.2% in 2023. However, uncertainties loom on the horizon, with concerns about the removal of petrol subsidies, inflation rates, and consumer spending impacting the country's economic landscape. Sam Chidoka, the CEO of Kairos Capital, discussed these critical issues in a recent interview on CNBC Africa. Chidoka highlighted the global economic outlook provided by the IMF, which painted a picture of a rocky recovery with global growth expected to bottom out at around 2.8% before rising to 3% in the following year. He emphasized the interconnected nature of international economies, pointing to past instances like the 2008 subprime bust in the US that had far-reaching effects around the world. Factors such as the conflict between Russia and Ukraine leading to commodity price hikes are expected to contribute to global economic uncertainties. Turning his focus to Nigeria, Chidoka expressed concerns about the volatility and uncertainties facing the country's economic growth. He pointed out the challenges posed by factors such as cash and currency crunches, recent elections, and ongoing political processes that could impact the economy. The removal of petrol subsidies further complicates the economic outlook, with potential repercussions on growth projections. Inflation has been another significant issue for Nigeria, with the IMF projecting a rate of around 20% for the year. Chidoka compared Nigeria to Ghana, where efforts to control inflation through monetary and fiscal policies have shown results, leading to a significant drop in headline inflation. However, he cautioned that Nigeria may experience an uptick in inflation, especially with the removal of fuel subsidies. Discussing the policy response to inflation, Chidoka highlighted the IMF's call for further tightening. While acknowledging the modest impact of tightening measures in moderating inflation, he expressed doubts about their effectiveness in significantly reducing inflation rates. The impending removal of fuel subsidies poses a substantial risk to inflation, with expectations of a significant increase in fuel prices that could further strain consumer spending. The impact of rising petrol prices and inflation on consumer spending was a major concern raised by Chidoka. Highlighting the significant spending on subsidies and the sharp increase in petrol prices over the past three years, he warned of the adverse effects on disposable income for individuals and families. The ripple effects of reduced disposable income are already being felt in the business sector, with some companies opting to shut down production lines in Nigeria and move operations overseas in search of cost efficiencies. As Nigeria navigates these economic challenges in 2023, Chidoka advised individuals and businesses to exercise caution, tighten their belts, and prepare for potential economic headwinds. The path ahead remains uncertain, with the country bracing for a challenging year amidst shifting economic dynamics and policy decisions.