IMF's Forecast On Economy Defied By Nigeria's GDP Growth

In recent years, forecasts from the likes of the International Monetary Fund (IMF) get churned out regarding the progress or otherwise of selected countries based on certain parameters best known to the forecasters. In Nigeria, IMF forecasts are nothing strange to our trajectory as a nation, at least in the past 20 years of the nation's non-excellent regimes.

If we initiate research and vigorous analyses of the sheer size and nature of the errors in GDP forecasts in the G7 countries, for example, from 1971 to 1995, they will be mind-blowing.

These GDP short-term forecasts are produced by the Organization for Economic Cooperation and Development and by the International Monetary Fund, and published twice a year in the Economic Outlook and in the World Economic Outlook, respectively. 

Typically, the evaluation of the accuracy of the forecasts should be based on the properties of the difference between the realization and the forecast.

For example, a forecast will be considered as accurate if it is unbiased and efficient.

On the other hand, a forecast will be unbiased if its average deviation from the outcome is zero, and, also, it will be deemed efficient if it reflects all the information that is available at the time the forecast is made.

It is against these backdrops that we can attempt to review the most recent forecast by IMF on Nigeria's GDP. 

According to the National Bureau of Statistics (NBS) in its recently released fourth-quarter report, Nigeria’s annual Gross Domestic Product (GDP) for 2022 rose to 3.10 per cent in real terms, a drop from 3.40 per cent that was recorded in 2021.

The report, which indicated that the economy recorded slower growth when compared to 2021, showed that the growth surpassed the projection made by the International Monetary Fund (IMF) in 2021, showing that the economy would grow by 2.7 per cent.

Even though the international money lender raised its projection later in the year to 3 per cent, Nigeria’s economy had to overcome flooding, inflation, and reduced oil production among others to stay afloat in the 3 per cent threshold after the economy tanked to negative growth in 2020.

According to the NBS, quarterly growth during the year indicated that Q3 had the highest growth at 3.54 per cent followed by Q4 with 4.52 per cent, Q1 with 3.11 per cent and Q3 had the lowest growth at 2.25 per cent.

Nigeria’s economy is broadly divided into oil and non-oil sectors. With the low production of crude oil over the years, the country has made attempts to reinvigorate the non-oil sector.

This attempt has been gaining ground with the annual growth rate of the non-oil sector growing by 4.44% in real terms, contributing 94.43% to the economy while oil declined to -19.22% in 2022 as it contributed 5.67 per cent to the economy.

Overall, the top 10 contributing activities to Real GDP were crop production, 24.10, Trade 15.82, telecommunications and information, 15.55 per cent, real estate 6.18 per cent, crude petroleum and natural gas 4.34 per cent, food, beverage, and tobacco, 4.14 per cent, financial institutes 3.67 per cent, construction 3.47 per cent, professional, scientific and technical services 3.34 per cent and other services 3.27 per cent.

Cumulatively, the sector is categorised into agriculture, industries, and services, with each contributing 25.58, 19.02, and 55.40 per cent respectively.

In nominal terms, the report noted that the country’s economy as of December 2022 was worth N202tr.

Agriculture is the highest contributor with N47.9tr followed by manufacturing with N27.5tr, trade N26.6tr, information and communication N21.48tr, construction N18.6tr and mining and quarrying N13.6tr.

Others include real estate N10.2tr, financial institutions N6.7trn, transportation and storage N4.29tr, professional, scientific, and technical services, N5.3tr, public administration N3.3tr, education N3tr, electricity, gas, steam and air conditioning supply N1.78tr, human health, and social services N1.19tr and accommodation and food services N1.75tr.

Conclusion

A second look at the dominant contributors to the GDP growth reveals that the oil & gas sector played minimal roles.

This, perhaps, explains why IMF missed it.

Most times, forecasts about Nigeria are unusually anchored on the oil and gas industry dynamics to the exclusion of other dynamic sectors like agriculture and manufacturing.

Considering that some forecasts may have concomitant negative effects, forecasters like IMF will do well to be holistic enough in gathering all the right inputs to their forecasts.

Except, however, where insidious motives are the case!