Researchers at the macroeconomic intelligence consulting firm, Focus Economics, have warned that failure by Nigerian government to end the fuel subsidy regime could pose a serious threat to the efficiency of the nation’s fiscal system.
The company gave this warning in its April 2023 Consensus Forecast Report, noting that Nigeria’s economic growth will slow down in 2023 in the face of surging inflation and high borrowing costs.
The firm cautioned: “Failure to scrap government’s fuel subsidy is a major fiscal risk, as is the evolution of the cash shortage. Widespread insecurity is a key downside risk, while the coming online of the Dangote refinery is an upside risk.
“Nigeria’s oil sector has continued to be a drag on overall growth, albeit less so than in previous quarters. In Q4, the sector posted a 13.4% decline, a more moderate contraction than Q3’s 27.7% plunge.
“Oil production rose to an average of 1.34 million barrels per day (mbpd) in Q4 from 1.20 million barrels per day (m/bpd) in the previous three months. The improvement in production was largely due to the government’s ongoing crackdown on oil theft and the restoration of operations at a terminal in November.
“The non-oil sector of the economy was the engine of growth – as it has been since late 2020. Growth in the sector picked up to 4.4% year on year in Q4 (Q3 +4.3% year-on-year). The acceleration chiefly reflected the agricultural sector gaining steam and growing 2.0% in Q4 (Q3:1.3% year-on-year),”, the research firm added.
