IMF slashes Nigeria’s growth forecast to 2.9%, cites continuing borrowing despite rising debt cost

.The revised forecast represents a 0.2 percentage point decrease from the 3.1% growth forecast projected in the July 2024 WEO.

However, the IMF slightly raised its forecast for Nigeria’s economic growth in 2025, projecting a growth rate of 3.2%, up from 3.0% in the July report.

Similarly, the IMF reduced its 2024 growth forecast for Sub-Saharan Africa to 3.6%, down from 3.7% in July. However, it raised the region’s 2025 growth forecast to 4.2%, up from 4.1%.

The IMF explained: “In sub-Saharan Africa, GDP growth is projected to increase from an estimated 3.6% in 2023 to 4.2% in 2025, as the adverse impacts of prior weather shocks abate and supply constraints gradually ease.”

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The report noted that the downgrade for Sub-Saharan Africa reflects slower growth in Nigeria, amid weaker-than-expected activity in the first half of 2024. Additionally, ongoing conflict in South Sudan has led to a significant 26% contraction in its economy.

Meanwhile, the IMF said Nigeria’s engagement with the global debt market remains vibrant despite challenges posed by high borrowing costs.

During a press conference on the global financial stability report at the IMF/World Bank annual meetings in Washington DC, the IMF’s Financial Counsellor and Director of Monetary and Capital Markets, Tobias Adrian, said that Nigeria and other frontier markets have maintained significant activity in the debt market throughout 2024, even though financing costs have surged compared to pre-2021 levels.

He said, “Frontier markets, including Nigeria, have been active in the debt market this year, and though access to financing is still more expensive than before, the overall issuance levels have been encouraging.”

However, the IMF expressed support for Nigeria’s recent monetary policy measures, particularly the Central Bank of Nigeria’s interest rate hikes and foreign exchange reforms, which have been designed to stabilise the economy.

Adrian noted that the CBN’s shift toward inflation targeting and its efforts to liberalise the exchange rate has been crucial in addressing inflation, which remains close to 30 per cent.

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