Fitch Solution an international rating agency has estimated that Nigeria GDP will grow by 2.8 per cent in 2022. In a report on Nigeria in Africa Monitor, West Africa it said “We forecast real GDP accelerating to 2.8 per cent in 2022, assisted by a substantial rebound in the oil sector driven, in part, by the passing of the long-awaited Petroleum Industry Act (PIA) – which details improvements to the oversight, regulation and taxation of the hydrocarbons industry, including financial incentives for oil companies. Previously known as the Petroleum Industry Bill, the PIA was signed into law by President Muhammadu Buhari on August 16. However, we expect implementation to proceed gradually in the coming quarters, with tailwinds to fixed investment and exports likely to become increasingly evident from 2022 onwards. That said, we believe that the positive impact of the PIA on medium-term economic growth will be partly offset by ongoing structural constraints such as persistent insecurity, unreliable electricity supplies and high unemployment, and thus while we have made upward revisions to our medium-term real GDP growth forecasts, these adjustments have been slight.
“Some Restrictions Will Remain. We expect Nigeria to experience a moderate economic recovery in 2021. Data published by the national statistics bureau indicate that real GDP growth accelerated, for a third consecutive quarter, to 5.0% y-o-y in Q2 2021 from 0.5% Q121. The Q2 2021 data indicate a relatively modest economic recovery, considering that real GDP contracted by a substantial 6.1% in Q220 (in q-o-q terms, real GDP contracted by 0.8% in Q221, indicating that the economy remains under pressure). Nevertheless, the Q221 outturn was moderately higher than we had anticipated, and reflecting this, we have upwardly adjusted our real GDP growth forecast for 2021 from 1.8% to 2.1%. Relatively weak household consumption growth will prevent a stronger rebound in economic growth. Private consumption will see relatively weak growth of 2.0% in 2021 as a result of high inflation – we forecast price growth accelerating to an annual average 16.7% in 2021, from 13.2% in 2020 – as well as weak labour market conditions (unemployment stood at 33.3% in Q420, latest data available) and subdued consumer sentiment. The latter will be weighed down by limited progress on the government’s Covid-19 vaccination programme (at the time of writing, just 2.0% of the population had received at least one dose). Given that it constitutes the largest share of GDP (at 82.7% in 2020), household spending will make the largest contribution to headline growth at 1.2 percentage points (pp).
“Government consumption will rise and add 0.3pp to real GDP growth. On July 7 the Senate approved a supplementary budget outlining additional funding for the government’s Covid-19 response (including funds for vaccine procurement and oxygen supplies at hospitals) and increased financial support for the security services. Reflecting this elevated expenditure, we forecast government consumption growing by a robust 4.5% in 2021, although given its fairly small share of GDP (7.5%), the positive impact on economic growth will be modest. Meanwhile, we expect fixed investment to rise by a tepid 2.1% as business activities continue to normalise, and firms proceed with projects that were put on hold during the first phase of the pandemic, when lockdown rules were their most stringent. This pattern is reflected in the Nigeria Purchasing Managers’ Index, which rose from 53.6 in June to 55.4
