Nigeria’s Unemployment Rate To Hit 37% In 2023- NESG

 

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Nigeria’s Unemployment Rate To Hit 37% In 2023, Says NESG

 

. Poverty Rate To Reach 45%

 

 

NIGERIA’Sunemployment rate has been projected to hit 37%, and poverty rate at 45% in 2023, according to the Nigerian Economic Summit Group (NESG).

 

NESG disclosed this at the launch of its 2023 Macroeconomic Outlook Report, titled: “Nigeria in Transition: Recipes for Shared Prosperity,” in Lagos.

 

The group attributed the increases to the weak performance in the job-elastic sectors, low labour absorption of sectors that will drive growth, and population growth estimated at 3.2%, all of which will lead to a decline in real per capita income.

 

The report also projected that crude oil futures will average $85 per barrel, a fallout of the Russia-Ukraine crisis on the energy market, adding that elevated demand for crude oil will sustain prices at a level relatively higher than the $70/barrel proposed in the 2023 budget.

 

The Group noted that as efforts to contain crude oil theft in Nigeria intensifies; crude oil production this year will average 1.35 million barrels per day (mbpd).

 

“This represents an improvement over 1.15mbpd in 2022 but is 20% lower than the 2023 budgetary oil production of 1.69mbpd. The outcome is an improvement in government capital expenditure to N2.35 trillion representing a budget implementation rate of 43.9%,” it said.

 

Based on these assumptions, the report forecast real Gross Domestic Products (GDP) to moderate at 2.98% and inflation at 20.5%, adding that economic growth will be subdued in 2023 due to strains on investment and low productivity in critical sectors.

 

It said: “The services sector will drive economic growth, but this growth will not be strong enough to generate significant jobs. As a result, unemployment will remain unabated. Economic growth will be supported by election-related spending and improvement in the oil sector.

 

“Food inflation will remain the fundamental driver of inflation due to the enduring impact of flooding, increased production costs due to increased cost of credit, insecurity and displacement. Existing fuel shortages and the removal of fuel subsidies will continue to increase the core components, especially transportation,” it said.

 

The Group continued: “The trade surplus will be sustained albeit lower, the foreign reserve will deplete further, and exchange rate pressure will persist.

 

“Due to political risks and a negative yield on investment, investors will take a flight to safety in other emerging and developed economies. An improvement in crude oil production will sustain the trade surplus.

 

“CBN intervention in the FX market and shortage in FX inflow will culminate in a decline in foreign reserves to US$34.9 billion at the end of 2023. The decline in forex supply will further support exchange rate depreciation. CBN may consider Naira devaluation to reduce the exchange rate premium and reduce market intervention on the back of external reserve depletion.

 

“As a result, the official exchange rate is expected to hit N500/US$. Similarly, an FX shortage will support the black-market operation, where the exchange rate will depreciate even at a faster rate.”

 

The Outlook noted that monetary policy tightening will continue, while lending rate will remain high, and constrain investment.

 

“A tight policy stance in developed economies leads to capital flight from developing and emerging markets and inflationary pressure will highlight the need for further tightening to close the interest rate differential and rein in inflation.

 

“This could heighten financial risk and increase Non-Performing Loans (NPL) in the banking system. Monetary tightening in 2022 has signalled an upward trend in interest rates.

 

“In addition, a faster increase in credit to the government will reduce credit availability to the private sector, thereby supporting further increases in the cost of borrowing

 

“The budget underscores fiscal deficit expansion and the upward trajectory in public debt stock to N53.8 trillion. Fiscal sustainability will remain a concern as government revenue will be eroded by personnel costs and high-interest payments on debt.

 

“While moderate crude oil prices and improvement in crude oil production are expected to support revenue, an increase in debt servicing – especially external debt due to exchange rate depreciation– will constrain the government from expanding capital project expenditure,” it said.

 

The Chief Executive Officer, NESG, ‘Laoye Jaiyeola, described 2023 as a transition year that offers Nigeria an opportunity to reassess and adjust its growth strategy to implement effective and efficient reforms that would benefit the entire population.

 

Jaiyeola said: “In the NESG Macroeconomic Outlook for 2023, we stressed the importance of reforms in achieving shared prosperity in Nigeria. The report outlines the key factors that will support the two specific goals identified and provides policy recommendations to drive the economy towards a prosperous future for all.”

 

He also urged Nigeria to take advantage of “this opportunity to realign its growth strategy and make the necessary reforms to improve the well-being of its citizens and create a more equitable and sustainable future.”