IMF Predicts 2.4% Economic Growth For Nigeria In 2021

Following a revised contraction of 4.3 percent in 2020, the International Monetary Fund (IMF) has projected that Nigeria’s economy will grow by 2.4 percent in 2021.

READ ALSO: Ogun to launch MSMEs development fund

The new projection is contained in the April 2021 World Economic Outlook (WEO)  presented Tuesday in Washington D.C. by Gita Gopinath, the fund’s Chief Economist at the ongoing IMF/World Bank Spring Meetings which began on Monday and scheduled to end Sunday.

The Fund which also projected six percent growth for the global economy in 2021, moderating to 4.4 percent in 2022, estimated the growth for Sub-Saharan Africa, at 3.4 percent, with South Africa at 3.1 percent. .The new global projection came after an estimated contraction of –3.3 percent in 2020.

The IMF had in its World Economic Outlook report for October 2020 gave a revised contraction of 4.3 percent for Nigeria after its April projection of a 3.4 percent contraction of the economy. It also predicted a 5.4 percent contraction in June while it projected that the economy would recover by 1.7 percent in 2021.

Last year report also projected 2020 global growth to contract by 4.4 percent, a less severe contraction than forecast in the June 2020 World Economic Outlook Update.

However, in its latest report released Tuesday, the Fund said that the contraction for 2020 was 1.1 percentage points smaller than projected in the October 2020 WEO.

This, it said reflected the higher-than-expected growth outturns in the second half of the year for most regions after lockdowns were eased and as economies adapted to new ways of working.

“The projections for 2021 and 2022 are 0.8 percentage point and 0.2 percentage point stronger than in the October 2020 WEO, reflecting additional fiscal support in a few large economies and the anticipated vaccine-powered recovery in the second half of the year.

“Global growth is expected to moderate to 3.3 percent over the medium term, reflecting projected damage to supply potential and forces that predate the pandemic, including ageing-related slower labour force growth in advanced economies and some emerging market economies.

“Thanks to unprecedented policy response, the COVID-19 recession is likely to leave smaller scars than the 2008 global financial crisis.”

The United States of America is expected to grow by 6.4 percent and China by 8.4 percent in 2021 according to the report that noted that emerging market economies and low-income developing countries were harder hit and were expected to suffer more significant medium-term losses.

The IMF said that there were divergent impacts with output losses particularly large for countries that relied on tourism and commodity exports and for those with limited policy space to respond.

It added that many of the countries entered the crisis in a precarious fiscal situation and with less capacity to mount major health care policy responses or support livelihoods.

According to the report, the projected recovery follows a severe contraction that has had particular adverse employment and earnings impacts on certain groups.

The IMF said youth, women, workers with relatively lower educational attainment and the informally employed had generally been hit hardest and income inequality was likely to increase significantly because of the pandemic.

“Close to 95 million more people are estimated to have fallen below the threshold of extreme poverty in 2020 compared with pre-pandemic projections.

“Moreover, learning losses have been more severe in low-income and developing countries, which have found it harder to cope with school closures and especially for girls and students from low-income households.

“Unequal setbacks to schooling could further amplify income inequality.”

Gopinath said that once the health crisis was over, policy efforts could focus more on building resilient, inclusive and greener economies, both to bolster the recovery and to raise potential output.

She also said that priorities should include investing in green infrastructure to help mitigate climate change, strengthen social assistance and social insurance to arrest rising inequality.

Also, introduce initiatives to boost production capacity and adapt to a more digitalised economy and resolve debt overhangs.

She added that policymakers should continue to ensure adequate access to international liquidity.

According to Gopinath, major central banks should provide clear guidance on future actions with ample time to prepare to avoid taper-tantrum kinds of episodes as occurred in 2013.

“Low-income countries will benefit from further extending the temporary pause on debt repayments under the Debt Service Suspension Initiative and operationalising the G20 Common Framework for orderly debt restructuring.

“Emerging markets and low-income countries will benefit from a new allocation of the IMF’s special drawing rights and through pre-emptively availing themselves of the IMF’s precautionary financing lines, such as the Flexible Credit Line and the Short-Term Liquidity Line.


Tony Elumelu Foundation (TEF)

TEF to prioritise economic recovery of SMEs in 2021

The Tony Elumelu Foundation (TEF) entrepreneurship programme says the seventh edition will prioritise the economic recovery of small and medium scale enterprises (SMEs) following the global disruptions triggered by the COVID-19 pandemic.

READ ALSO: We want to partner with skilled artisans within Enugu

Somachi Chris-Asoluka, director of partnerships and communications at TEF, who disclosed this, equally wants applicants for the 7th edition of the programme to ensure that their applications reach the foundation before the March 31 deadline. Application for the programme commended on January 1, hosted on the Tefconnect digital platform (

According to Chris-Asoluka, entrepreneurs’ full participation would create a pathway to economic prosperity.

“This year, we have the capacity to empower more African entrepreneurs than ever, further ensuring that they have adequate training, funding, and mentorship to boost their performance.

It is time for young African entrepreneurs to embrace this much-needed support system to enable thriving and sustainable economic activity. We believe we will continue to see an exponential change in sectors across the continent,” she said.

Chris-Asoluka said that the programme would empower over 3,500 young African entrepreneurs in collaboration with global partners in order to address the challenges arising from the pandemic, adding that the goal was to lift millions out of poverty and create sustainable employment across the continent.


Manufacturing sector

Investment in Nigeria’s manufacturing sector down 76% on COVID-19

The Nigerian manufacturing sector is still reeling from the effect of COVID-19 as investment inflow into the sector declined by 76 percent in 2020, according to the Manufacturers Association of Nigeria (MAN)

READ ALSO: GTBank to challenge Flutterwave, Paystack

In its H2 economic review, MAN revealed that in 2020, manufacturing investments dropped to N118.52 billion representing a 76 percent decline when compared to the N496.11 billion achieved in 2019.

The decline was attributed primarily to the outbreak of the Coronavirus pandemic which disrupted economic activities globally and locally.

“Manufacturing investment declined in the period following the depressing fallouts from COVID-19 that gave no impetus for new investments in the sector,” the report states

According to MAN, in H1’2020, the sector recorded investment inflow of N62.08 billion, which was a 74 percent decline from the N248.45 billion achieved in H1 2019. In the second half of the year, investments further dipped by 78 percent to N56.44 billion from N257.66 billion realised in the same period of 2019.

The drop in investments also affected the overall performance of the sector, especially as many manufacturing firms were forced to either suspend or shut down operations during the period under review, thereby reducing the number of players in the sector.

“At the moment and following the impact of COVID-19 on productivity, the sector is at the lowest and therefore requires deliberate action to rekindle significant productive activities” the report added.

Emanating from China, the world’s manufacturing powerhouse and Nigeria’s largest trading partner, especially for manufacturing inputs, the COVID-19 pandemic caused an abrupt stop in the supply of raw materials, goods, tools, and machinery for manufacturing companies which forced many of them to suspend business operations.

Furthermore, Brent crude oil which serves as the major provider of the country‘s FX experienced a historic fall during this period, reaching a two-decade low in April at $15.98 a barrel. This drop triggered the prevailing FX shortage and also caused the naira to be greatly devalued thereby impeding the procurement operations of local manufacturers.

Consequently, after two years of consecutive growth, the sector glided to a negative terrain in 2020 with -2.75 percent, which is also the worst experienced since 2016 when the Nigerian economy entered into recession according to the GDP data released by the National Bureau of Statistics (NBS). The sector’s contribution to GDP as well dropped to 8.99 percent in full-year 2020 as against the 11.64 percent it achieved in 2019.

Furthermore, with Nigeria ranking 131st out of 190 countries surveyed on the 2020 World Bank’s ease of doing business index, business experts assert that due to the recurrent challenges in Nigeria’s business environment and insecurity challenges, investors are forced to take flight for the proverbial greener path, scaring away prospective investors.

Experts, however, believe that investment inflow will improve in the medium to long term following the partial border reopening and the implementation of the African Continental Free Trade Area (AfCFTA)

“The reopening of the land borders should provide succor to the manufacturing sector even as the kick-off of AfCFTA serves as an avenue for manufacturers to penetrate new African markets and for investors to flood the market” Jide Babatope, Lagos-based analyst said.

Beyond the decline in investments, manufacturers suffered a decline in the volume of demand for causing an uptick in the inventory of unsold goods. This is also coming amid the surge in production and operations cost.

MAN revealed that the inventory of unsold manufactured goods in the sector increased by 44 percent to N577.61 billion in 2020 from N402.42 billion recorded in 2019.

In H1’2020, inventory of unsold goods stood at N275.39 billion and it increased significantly to N303.22 billion in the second half of the year.


World Bank

World Bank: Nigeria’s road to economic recovery

According to the World Bank, economic growth is expected to expand by 1.1% this year while Bloomberg forecasts GDP to contract by 1.5% in Q1 2021.

Africa’s largest economy has displayed resilience over the past few months.

From defending against the Covid-19 menace to battling untamed inflation and shouldering domestic risks.

READ ALSO: Stock market opens on a positive note

Initially, the economic outlook was bleak during 2020 after the economy sunk back into its second recession in less than five years.

Lockdown restrictions caused significant disruptions in the value chain, halted most aspects of the economy while crippling the manufacturing sector.

A growing sense of alarm and unease over surging coronavirus cases added to the uncertainty, ultimately fanning fears around Nigeria experiencing a prolonged economic recession.

However, the economic expansion of 0.11% in Q4 2020 came as a breath of fresh air and offered some light at the end of the tunnel.

Although the economy contracted 1.92% for the full year, the rebound during the final quarter raised hopes that Africa’s largest economy was exiting from the Covid-19 induced recession.

According to the World Bank, economic growth is expected to expand by 1.1% this year while Bloomberg forecasts GDP to contract by 1.5% in Q1 2021.

Nigeria certainly has the potential to exceed these growth estimates due to rising oil prices and improving global economic conditions.

It must be kept in mind that earnings from oil exports account for over half of government revenues and about 90% of foreign-exchange earnings.

As oil prices appreciate, this provides the government with ammunition to attack domestic risks threatening the country’s fragile economic outlook.

In regards to other key metrics, inflation is seen averaging around 14% while the Central Bank of Nigeria (CBN) is forecast to hike interest rates at least once this year as economic conditions improve.


Investing During Recession

Investing During a Recession

Recession has in the last few years become something of a buzz word in Nigeria to describe the harsh economic conditions in the country and its resultant effect on the income, spending power and businesses of the people.

However, by definition, a recession happens when a country’s GDP falls in two consecutive quarters, while the Gross Domestic Product (GDP) simply means the measure of goods and services produced in a country over a period of time.

READ ALSO: Traders happy as movement of food trucks begins…

Last year, the economy contracted by 3.62 percent in the third quarter of 2020, indicating that two consecutive quarters of negative growth had been recorded in 2020 following the previous decline by 6.1 percent in the second quarter.

Officially, this meant that Nigeria’s economy slipped into recession and for the second time in four years as oil prices plunged in the midst of the COVID-19 pandemic.

Recessions are usually characterized by falling incomes, weakened sales and production as well as a drop in the confidence levels of investors. Consequently, this leads to an aversion for risk and often a tendency to err on the side of safety.

The interesting fact, however, remains that recessions often give way to recoveries soon after. In the light of this, with the right strategy, a recession might not necessarily be a bad time to invest.

These few tips will be useful in helping you create your personal investment strategy.

Avoid Panic One big mistake investors make in times of recession is to make panic-induced decisions and follow an inclination to liquidate investments in favour of cash. This could, however, mean that you box yourself into a “corner” which could eventually produce hefty losses once the economy begins to recover. This is especially for people who have a stock-based investment portfolio.

Also, patiently wait to get dividends for your existing investments and resist the urge to sell in panic. Carefully Inject Funds into Investments When a market is fraught with volatility and investor fear, it can be extremely difficult to time trades perfectly and properly predict when prices are likely to rise or fall.

The way to work around this is to find a personal saving pattern that works for you and then carefully identify investments that appear worthwhile to inject your saved resources into.

This can help you save money and also, significantly increases your purchasing power as prices are usually low at these times.

It may also be a good time to take advantage of low prices and get bargain deals especially in industries that have been hard hit by the recession but have clear potential to bounce back strongly.

Take a Peek In taking on new investments in this period, especially with direct investment like shares, always take a peek into the financial records as well as the business and operational models of the companies you are considering for investment.

Industries and companies that cater to basic human survival needs are a good bet in this regard because they can often expect to experience minimal upheavals even in a recession.

There is Nothing Wrong with Being Safe Investing in safety nets such as bonds and mineral resources such as gold can be a great way to store up value, as their performance is often unaffected by market forces.

This can help you diversify your portfolio properly and ensure you are not entirely reliant on how the stock market pans out. I leave you with the words of the American businessman, MichealNesmith “Behind every dark cloud, there is usually rain”.