NIGERIA

Key conditions andchallenges

Table 1

2023

Population, million

223.8GDP, current US$ billion

362.8

GDP per capita, current US$

1621.1

International poverty rate ($2.15)

aNigeria’s economic growth has been insufficient to raise living standards, weighed
down by weak macroeconomic fundamentals and several structural constraints. Overreliance on the oil sector for fiscal revenues,
exports, and FX inflows led macro stability
to erode with the sector’s deteriorating performance in recent years. Low revenues—including due to a costly petrol subsidy, low tax rates, and weak tax administration—have limited state capacity and public
service delivery. Inflation has remained
high and escalating on the back of a relatively loose monetary policy and exchange rate
depreciation. Structural factors holdingback the country’s growth potential include
lack of adequate energy and transport infrastructure, high domestic trade costs and foreign trade protectionism, widespread insecurity, weak institutions, and low levels ofhuman capital development.
The new administration has initiated boldreforms to reestablish the macroeconomic
conditions for stability and growth. The
petrol fiscal subsidy was eliminated, morethan trebling petrol prices. FX reforms
have been undertaken, leading to the unification of FX markets and to a market-reflective exchange rate. To alleviate the inflationary effects of these reforms on themost vulnerable, the government has been
implementing temporary cash transfers toreach 15 million households. Efforts arealso being made to tighten monetary

30.9
a63.5

a90.8

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini indexa35.1

School enrollment, primary (% gross)

b86.7

b52.7

Total GHG emissions (mtCO2e)

401.0Life expectancy at birth, years

policy and refocus the Central Bank ofNigeria (CBN) on its core mandate ofmaintaining price stability.

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2018), 2017 PPPs.
b/ Most recent WDI value (2021).

Nigeria has initiated bold reforms to restore macroeconomic stability, but further
efforts are needed. The Government has
moved forward on normalization of monetary policy, revenue-driven fiscal consolidation, and liberalization of the foreignexchange (FX) market. Translating oilproceeds into fiscal revenues and FX inflows, and taming inflation are still major
challenges. Nominal earnings have not
kept up with inflation, pushing 10 million
additional Nigerians into poverty in 2023.
Risks to the outlook include weaker reform
momentum and popular discontent.

FIGURE 1 Nigeria / Oil price, exports, government
revenues, and real GDP growth
Percent, percent of GDP20

Recent developments
Real GDP growth slowed from 3.3 percent
in 2022 to 2.9 percent in 2023. Agriculturaloutput decreased due to higher input
costs, sustained impact of floods, and insecurity. Services continued to hold up nonoil sector growth, especially in finance andinformation and communication. The oil
sector contracted for the fourth consecutive year, albeit at a lower rate.
Nigeria’s chronically high inflation
reached an all-time high of 29.9 percent
year-on-year in January 2024, driven byrising food and energy prices, loose monetary policy, and naira depreciation.
Nominal earnings have not kept up withinflation, pushing another 10 million
Nigerians into poverty in 2023. CBN has
started tightening monetary policy byraising the monetary policy rate (MPR)
by 400 basis points to 22.75 percent inFebruary 2024 and by unclogging someof its transmission channels. CBN has
restarted open market operations (OMOs)
at yields closer to the MPR, halted new
development finance schemes, committed
to stop monetization of fiscal deficits, removed the Standing Deposit Facility cap,
raised the cash reserve ratio to 45 percent, and improved communication.
Fiscal pressures remained high despite theremoval of fuel subsidy in the budget andnaira devaluation. General government

FIGURE 2 Nigeria / Real GDP growth and sectoral
contributions to real GDP growth
US$/bbl110

15Percent
590

470

31050

530

211000-10-5-1-30
2015

2017

2019

GDP growth (lhs)
Revenues (lhs)
Exports (lhs)
Oil price (rhs)

2021

2023e

2025f

-2
2021

GDP growth (lhs)
Revenues (lhs)
Exports (lhs)
Oil price (rhs)

Sources: Nigerian National Bureau of Statistics, WDI, and World Bank.

2022
2023e
Agriculture
Non-oil Industry
GDP (factor prices)

2024f

2025f
Oil Industry
ServicesSources: Nigerian National Bureau of Statistics and World Bank.

MPO1Apr 242026f

fiscal deficit in 2023 is estimated at 5.3
percent of GDP, 0.4 percentage points(pp) higher than in 2022. While oil revenues improved on the back of the naira
unification, gains from the removal of subsidy did not materialize as expected due
to low remittances from the Nigerian National Petroleum Corporation (NNPC) to
the federation and the emergence of an implicit FX petrol subsidy. Non-oil revenues
increased by 0.7 percentage points to 5.6
percent of GDP in 2023, but expenditures
picked up too, especially on capital goods
and interest payments. The current account balance (CAB) is estimated to haverecorded a surplus of 0.7 percent of GDP
in 2023, driven by lower interest payments
and imports. Gross reserves dropped by 11
percent to US$ 33bn in 2023 and net errors
and omissions remained high.

Outlook
The continuation of an ambitious reform program centered around macroeconomic stabilization is essential for

Nigeria to reap the reforms’ benefits.
The economy is projected to grow by
3.5 percent on average between 2024
and 2026, 0.9 pp higher than the population growth. The dissipation of thereforms’ initial shock and the stabilization of macroeconomic conditions
will instill a sustained but still slow
growth in the non-oil economy, while
the oil sector is expected to stabilize
with some recovery in production andslightly lower prices. Higher growth
rates will require structural reforms.
Inflation will remain elevated at 24.8
percent on average in 2024 but is expected to progressively moderate to15.1 percent by 2026 on the back ofmonetary policy tightening and exchange rate stabilization. As a result, poverty rates are expected to increase in 2024 and 2025 before stabilizing in 2026.
Exchange rate liberalization is expected to contribute to both fiscal and external balances. Fiscal pressure is expected to moderate over the outlook
due to higher dollar-denominated revenues and improved non-oil revenues.

TABLE 2 Nigeria / Macro poverty outlook indicators

The fiscal deficit is expected to drop
to 4.3 percent of GDP on average between 2024-2026, and debt servicing
to fall from 97 percent of revenues
in 2024 to 61 percent of revenue in2026. Exchange rate depreciation will
also reduce imports, including gasoline, leading to a CAB of 1.2 percent
of GDP on average between 2024-2026.
Foreigninvestments
willfollow
macroeconomic stabilization.
Risks to Nigeria’s outlook are substantial, especially if reforms lose momentum or are reversed. Relatively weakmonetary policy tightening would beinsufficient to rein in inflation and attract foreign capital inflows, raising
the risks of an inflation-exchange rate
depreciation spiral. Failure to address
imbalances in petrol pricing and toraise non-oil revenues would jeopardize the reforms’ revenue gains,which, in turn, would lead to continued high fiscal deficit and risks ofits monetization. Rising insecurity, adverse climate shocks, and popular
discontent with inflation would dent
economic recovery.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices

2021
3.6

2022
3.3

2023e
2.9

2024f
3.3

2025f
3.5

2026f
3.7

Real GDP growth, at constant factor prices
Agriculture
IndustryServices

3.4
2.1
-0.5
5.6

3.1
1.9
-4.6
6.7

2.7
1.10.7
4.2

3.2
1.7
1.8
4.4

3.4
1.9
1.6
4.7

3.6
2.2
1.7
4.9

Inflation (consumer price index)

17.0

18.8

24.7

24.8

18.5

15.1

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

-0.7
-0.3

0.2
0.0

0.7
-0.1

2.2
-0.4

0.9
-0.5

0.5
-0.5

Fiscal balance (% of GDP)
Revenues (% of GDP)

-6.6
6.7

-4.9
6.7

-5.4
7.8

-4.6
8.7

-3.7
9.6

-3.8
9.6

Debt (% of GDP)
Primary balance (% of GDP)

39.0-3.9

40.0
-1.5

48.9
-1.9

50.9
-1.0

46.6
-0.1

45.1
-0.1

34.6
66.2
90.6

35.3
67.1
91.3

38.9
69.8
91.9

40.7
70.9
91.9

42.3
71.7
91.8

42.5
71.4
91.2

2.3
35.1

3.0
35.4

3.1
35.6

3.4
36.1

3.2
36.5

3.5
37.0

a,b

International poverty rate ($2.15 in 2017 PPP)a,b
Lower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2018-LSS. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026.
b/ Projections using microsimulation methodology.

MPO2

Apr 24