The African Jotter

World Bank slashes Nigeria’s growth projection amid a slowing global economy

Nigeria’s economic growth forecast for 2019 has been slashed to 2.1 percent, down from the 2.2 percent forecast made by the World Bank last October.

The new prediction, which represents 0.1 percentage point reduction is contained in the April edition of Africa’s Pulse, the bank’s periodical analysis of the state of African economies. The bank also cited stagnant oil production, high inflation and policy distortions as reasons for the cut in projection.

“This modest expansion reflects stagnant oil production, as regulatory uncertainty limits investment in the oil sector, while non-oil economic activity is held back by high inflation, policy distortions, and infrastructure constraints,” the report stated.

While it added that improving financing conditions will help boost investment as the economy’s growth is projected to rise slightly to 2.2 percent in 2020 and reach 2.4 percent in 2021.

Estimates for sub-Saharan Africa?

Due to slower growth in three of the region’s biggest economies, the World Bank also cut its growth estimates for sub-Saharan Africa as the region’s economy is forecast to recover to 2.8 percent in 2019 and 3.3 percent in 2020.

“This upturn is supported, on the demand side, by exports and private consumption and, on the supply side, by a rebound in agriculture, an increase in mining production, and steady growth in the services sector in some countries,” the report revealed.

The projections represent 0.5 and 0.3 percentage points lower than last October’s forecasts, respectively. It reflects slower growth in Nigeria and Angola, due to challenges in the oil sector, and subdued investment growth in South Africa, due to low business confidence.

Furthermore, commodity prices improved in the first quarter of 2019, but according to the report, they are below their peak in 2018 and the oil market outlook remains highly uncertain. Albeit, as activity strengthens in the region’s three largest economies, regional growth is expected to improve slightly to 2.4 percent in 2021.

Challenges from the external environment

The external environment for the sub-Saharan region remains challenging, as global growth continues to decelerate, and global uncertainty related to trade disputes between the United States and China remains high.

The global economy has seen international trade and manufacturing activity softened, trade tensions elevated, and some large emerging markets experiencing substantial financial market pressures.

In January this year, the World Bank projected that global economic growth will soften from a downwardly revised 3 percent in 2018 to 2.9 percent in 2019 amid rising downside risks to the outlook.

“Despite the rebound, growth in the region (sub-Sahara) will remain well below its long-term average … However, there is significant heterogeneity in growth performances, with over one-third of the countries expected to grow at more than 5 percent in 2019 to 2021,” the report added.