By Chijioke Ohuocha
ABUJA (Reuters) – Nigeria’s growth outlook has improved thanks to non-oil sectors and higher oil prices, but those gains are being undermined by the increased cost of a petrol subsidy and distortions in the exchange rate of the naira, the World Bank said on Tuesday.
Nigeria’s economy grew for the sixth consecutive quarter in the first quarter of 2022, with non-oil sectors helping the country bounce back from a severe recession caused by the COVID-19 pandemic, according to official data.
The World Bank said it now expects Nigeria’s 2022 growth to match last year’s 3.4%, revised up from an earlier estimate of 2.8% in November.
It said the growth outlook had improved for the next three years, but other aspects of Nigeria’s overall economic picture were deteriorating, highlighting the petrol subsidy as a matter of concern.
The government has said rising oil prices could push the scheme’s cost to 4 trillion naira ($9.6 bln) this year from 443 billion naira budgeted earlier under an assumption the subsidy would be scrapped within the first six months.
“Our revised estimates … indicate a more vulnerable macroeconomic position in 2021 and the first half of 2022, which is further compounded by the increasing premium between the official and the parallel black market exchange rates,” the World Bank said in a report.
In November, the lender said Nigeria needed to end its costly petrol subsidy within the next three-to-six months, improve exchange-rate management and speed up other reforms to boost growth.
On Tuesday, the Bank said Nigeria had maintained the same policies that supported multiple exchange rates and the central bank’s financing of government despite increased risks.
It added that the war in Ukraine has increased capital flow uncertainty, boosted prices of imported food and inputs for fertilizers and heightened oil price volatility.
(Reporting by Chijioke Ohuocha; Editing by Estelle Shirbon and Tomasz Janowski)
