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Economy & Politics

Nigeria’s economy to grow by 1.1% in 2021 – World Bank

The World Bank expects growth in Nigeria to resume at 1.1% in 2021 but fears the rebound could be affected by lower oil production due to quotas.

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The World Bank has forecasted that the global economy is set to rebound by 4% in 2021, while Nigeria’s economy is expected to resume at 1.1%.

The World Bank released this on Monday in its January 2021 Global Economic Prospects. The World Bank said:

  • “The global economy is expected to expand 4% in 2021, assuming an initial COVID-19 vaccine rollout becomes widespread throughout the year. A recovery, however, will likely be subdued, unless policy makers move decisively to tame the pandemic and implement investment-enhancing reforms.”

READ: COVID-19: 115 million people are likely to fall into extreme poverty in 2020 – World Bank Group

The World Bank urged that administrators needed to focus on improving business environments, and increase labour and product market as the pandemic had severely affected the global economy.

World Bank Group President, David Malpass, said:

  • “While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges — in public health, debt management, budget policies, central banking and structural reforms — as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth.
  • “To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labour and product market flexibility, and strengthen transparency and governance.”

READ: Nigeria’s economy will grow by 2.4% on average in 2021-25 – CEBR

The World Bank added that the 2020 economic fallout was slightly less severe than previously projected, citing shallower contractions in advanced economies and a more robust recovery in China. However, disruptions to activity in emerging economies were “more acute than expected.”

READ: World Banks provides NIMC with £172 million Covid-19 protective equipment

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Sub-Saharan Africa 

The World Bank added that Nigeria’s economy was estimated to have contracted 4.1% in 2020, as the effects of the pandemic impacted economic activities in all sectors, even across the region.

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  • “In South Africa, where economic activity was on weak footing before COVID-19, output is estimated to have fallen 7.8% last year. The country suffered the most severe outbreak of the pandemic in the region and underwent strict lockdowns that brought the economy to a standstill.”

READ: Rejigging Nigeria’s economic growth engine: The courage to act

The World Bank said oil exporters in the region grappled with sharply lower prices, however, contractions in agricultural commodity exporters were less steep.

  • “Growth in the region is forecast to rebound moderately to 2.7% in 2021.”

READ: CIBN: Our economic challenges are of a global dimension – Emefiele

Stanbic 728 x 90

The World Bank said it expected growth in Nigeria to resume at 1.1% in 2021, citing that Nigeria’s economic rebound would be affected by lower oil production due to quotas.

  • “Growth in Nigeria is expected to resume at 1.1% in 2021. Activity is nevertheless anticipated to be dampened by low oil prices, OPEC quotas, falling public investment due to weak government revenues, constrained private investment due to firm failures, and subdued foreign investor confidence.
  • “In South Africa, growth is expected to rebound to 3.3% in 2021. An expectation of weak growth momentum reflects the lingering effects of the pandemic and the likelihood that some mitigation measures will need to remain in place.”

READ: COVID-19: Income remains unstable for many households – NLPS survey

What you should know 

  • Nigeria’s Gross Domestic Product (GDP) in real terms declined by -3.62% (year-on-year) in Q3 2020, thereby marking a full-blown recession and second consecutive contraction from -6.10% recorded in the previous quarter, Q2 2020.
  • The Federal Government of Nigeria stated that the latest recession in the country would be short-lived, as it expected Nigeria to return to positive growth soon unlike during the 2016 recession.

READ: COVID-19: Best and worst case scenarios for the Nigerian economy

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Coronavirus

Lack of vaccine access will reduce Africa’s economic growth compared to rest of world – IMF

IMF forecasts that Nigeria is expected to grow by 2.5% in 2021 and 2.3% in 2022.

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The International Monetary Fund (IMF) has stated that a continued lack of access to vaccines will see Africa’s projected growth at 3.4% compared to the rest of the world at 6%.

The IMF disclosed this in its Regional Economic Outlook for Sub-Saharan Africa, April 2021, which was published on Thursday.

What the IMF said

  • Despite turning out better than expected, growth in 2020 is estimated to have been the worst on record at –1.9 %, leading to a sharp spike in poverty.
  • In 2021, the region’s economy is expected to resume expansion at 3.4%, weaker than the 6% for the rest of the world, amid a continued lack of access to vaccines and limited policy space to support the crisis response and recovery.
  • Macroeconomic policies will in many countries entail some difficult choices. Saving lives remains the first priority, which will require access to affordable vaccines, ensuring that the logistical and administrative prerequisites of vaccination rollouts are in place, targeted containment efforts, and added spending to strengthen local health systems.

The IMF urged that African leaders needed to create more fiscal space and implement transformative reforms to unlock economic growth. These include mobilizing domestic revenue, strengthening social protection, promoting digitalization, and improving transparency and governance.

The body added that the need for reforms is to reduce debt and find a sustainable footing which would be a catalyst for longer-term growth and provide opportunities for the region’s new job seekers.

On growth projections

  • IMF forecasts that Nigeria is expected to grow by 2.5% in 2021 and 2.3% in 2022.
  • South Africa is expected to grow by 3.1% in 2021 and 2.0% in 2022.
  • Kenya is expected to have higher growth at 7.6% in 2021 and 5.7% in 2022.
  • Meanwhile, Ghana is forecasted to grow by 4.6% in 2021 and 6.1% in 2022.

In case you missed it

Nairametrics reported earlier this month that the International Monetary Fund had lifted its global growth outlook to 6% in 2021 (0.5% point upgrade) and 4.4% in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3% in 2020, due to the effects of the COVID-19 pandemic.

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Economy & Politics

Money Printing: Emefiele threatens to recover budget support loans from state govts

Godwin Emefiele has threatened to recover intervention loans extended to State Governors

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New CBN guidelines ban MMOs, PSPs, Operators from receiving diaspora remittances

Central Bank Governor, Godwin Emefiele has threatened to recover intervention loans extended to State Governors following remarks made by Edo State Governor Godwin Obaseki that the government had printed N60 billion to fund government expenditure.

In response to the question asked by Journalists, Emefiele remarked:

“In 2015, 2016 the kind of situation we find ourselves now, which is even worse than 2015 2016, we did provide budget support facility for all the states of this country, that loan remains unpaid till now and we are going to insist on the states paying back those monies going forward since they are accusing us of giving them loans.

The comments appear to be a threat to State Government that the Central Bank will call back loans issued to state governments which could perhaps mean deducting the loans from the monthly Federal Allocations shared between States and Federal Government.

States and Federal Government have faced severe economic challenges over the last year as Covid-19 Pandemic and the fall in oil prices hurt government revenues. To continue running the government, the central bank lent trillions of naira to the Federal and State Government through several intervention funds often backed by the Ways and Means provisions which allow the apex bank to lend money to the government.

Godwin Obaseki told his state transition committee members

”When we got FAAC for March, the federal government printed an additional N50-N60 billion to top-up for us to share. This April, we will go to Abuja and share. By the end of this year, our total borrowing is going to be between N15 and N16 trillion. Imagine a family that is just borrowing without any means to pay back and nobody is looking at that, everybody is looking at 2023, everybody is blaming Mr. President as if he is a magician.”

The Finance Minister chastised the governor for making such a comment explaining that

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“The issue that was raised by the Edo State Governor for me is very, very sad Because it is not a fact….When we got FAAC for March, the federal government printed an additional N50-N60 billion to top-up for us to share. What we distribute at FAAC is revenue that is generated and in fact distribution revenue is public information. We publish revenue generated by FIRS, the customs, and the NNPC and we distribute at FAAC. So, it is not true to say we printed money to distribute at FAAC, it is not true,” Zainab Ahmed

Emefiele also attempted to explain the concept of printing money and at some point confused it with lending money. “If you understand the concept of printing of money. Printing of money is about lending money, that is our job. To print is about lending money”

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“Money Printing” in economic terms is also referred to as quantitative easing and occurs in a period of a recession or economic crunch. Central Banks pump money into the economy by either buying bonds or crediting the accounts of banks or the government in the hope that this will spur economic growth. The money is often repaid via tax receipts when the economy recovers. The United States recently doled out over 1 trillion to Americans to help them recover from Covid-19.

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