Why the IMF Reduced Nigeria’s GDP Growth Forecast to 2.9%

IMF’s economic growth projection dropping to 2.9% with the reduction in growth projection also evident across other African countries.

As a result of this, African representatives led by Nigeria’s Minister of Finance and the Coordinating Minister of the Economy, Wale Edun have held discussions with the International Monetary Fund (IMF) on how to ensure better living standards for people across the continent.

These Discussions were held during the ongoing annual meetings of the IMF and World Bank in Washington DC. During the meeting, The African Caucus chaired by Edun, reaffirmed Commitment to Strengthening Africa’s Economic Resilience.

Speaking on the outcome of the meeting, Wale Edun stated “We held a constructive discussion focused on making progress towards the shared goal we hold for raising living standards across Africa. The region is navigating a complex economic landscape”.

Managing Director of the IMF, Kristalina Georgieva noted that Geopolitical fragmentation, elevated borrowing costs, and the ongoing high cost of living are creating a challenging backdrop for policymaking in Africa with some countries on the continent also ocial instability and insecurity which imposes heavy human costs on populations while also undermining growth prospects and exacerbating economic vulnerabilities.

This she says “creates acute trade-offs in policymaking, further complicating the objectives of promoting inclusive development.

“Yet, progress has been made in bringing down inflation, stabilizing public debt, and pressing ahead with reforms.”

African Caucus

The African Caucus was established in 1963, to strengthen the voice of African countries in the Bretton Woods Institutions (BWIs) – the International Monetary Fund (IMF) and the World Bank Group (WBG), on development issues of particular interest to Africa.

Membership to the Caucus is open to all African Countries who are members of the IMF and WBG, currently all the 54 countries on the African continent. The countries are represented by their respective Governors at these institutions, commonly referred to as the African Governors, who are usually Ministers of Finance and Economic Development, and Central Banks Governors.

Slump in Nigeria’s Economic Growth Projection

in the latest World Economic Outlook (WEO) report released by the International Monetary Fund (IMF) on Tuesday, it projected a slowdown in Nigeria’s economic growth for 2024

According to the report, Nigeria’s economy is now expected to grow at 2.9% in 2024, maintaining the same growth pace recorded in 2023.

The latest projection is a 0.2% decrease from the previous projection in July and a 0.4% decrease from the previous projection in April.

Reasons for The Slump in Nigeria’s Economic Growth Rate

According to the IMF, “the revision (in growth projection) reflects slower growth in Nigeria, amid weaker-than-expected activity in the first half of the year.” 

Jean-Marc Natal, deputy chief of the IMF’s Research Department, further elaborated on Nigeria’s growth challenges, highlighting disruptions in agriculture and oil production as key factors behind the revised growth forecast.

Natal said: “We revised growth for Nigeria 2024 by 0.2% down. Things are volatile because the reason for the revision is precisely issues in agriculture related to flooding and issues in the production of oil, related to security and maintenance that have pushed down the production of oil. So, these two factors have played a role.”

The IMF however notes that its projections for the Nigerian economy in 2025 stands at 3.2% which is 0.2% higher than the projections made in July and April this year.

Comparing Nigeria’s Growth Projections to Other African Countries

Nigeria’s growth prediction for 2024 compares favorably with South Africa whose Economic growth projection for the same period stands at 1.1% while its 2025 economic projection stands at 1.5%.

Fellow oil producer Algeria outranks Nigeria with a 2024 economic projection of 3.8%, Neighboring Benin Republic has a 6.5% economic growth projection rate for 2024.

Egypt’s 2024 economic growth projection of 2.7% ranked below Nigeria’s, it however had a superior 2025 projection of 4.1%, Ghana had a 2024 projection of 3.1% and a 2025 projection of 4.4% which both outrank Nigeria’s while war-torn oil producing Libya had a 2024 projection of 2.4% and a 2025 projection of 13.7%.

The Way Forward

During the press conference Pierre-Olivier Gourinchas, the IMF’s economic counsellor and director of research, stressed the need to balance monetary and fiscal policies in order to tackle inflation and debt challenges.

He said, “In countries where inflation is very high, we recommend a tight monetary policy stance. In some cases, when possible, fiscal consolidation can help, though this is complicated by trade-offs many nations face.” 

He also warned on the need not to try and do too much too quickly due to the negative effects it might have stating:

“If you try to do too much too quickly, you might have an adverse impact on growth and you have to be careful because most countries have important needs when it comes to spending, whether it is about essential services, healthcare, public investments.

“We need to protect the kind of spending that is good for growth,” he concluded.

Significance of IMF’s Projection on Nigeria

IMF’s economic projections on Nigeria point at the course Nigeria’s economy is headed if the issues pointed out by the IMF are not addressed by the federal government, issues related to flooding and issues in the production of oil, related to security and maintenance that have pushed down the production of oil.

There is also the issue of the impact of the current economic reforms and if the process is too sudden for Nigerians to properly adjust to as the IMF representative in his remark urged for caution in carrying out economic reforms in order not to further worsen the economic situation of the country.

According to the World bank, Nigeria currently has a poor population put at 129million people, there is therefore a need to come up with the right economic policies to bring down this number while also being very careful so as not to push even more people into poverty.

 

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