BY CHIKA IZUORA, Lagos
The Nigerian oil and gas industry has been projected to experience production downtime caused by unplanned ground outages.
According to Fitch Solutions’ Country Risk & Industry Research report, Nigeria’s economic growth in 2023 will be slow as the oil sector, which has been a key drag on growth in recent years, will continue to struggle throughout the year.
“At Fitch Solutions, our oil and gas team estimates that Nigerian crude oil production will fall 15.2% in 2022 and another 14.9% in 2023,” the forecast said.
The contraction, he said, is being driven by unplanned outages at onshore production facilities, a deteriorating security situation and the lagging effect of years of underinvestment. “In 2024, however, we expect production to essentially level off,” Fitch said.
This change, he explained, would be driven by increased offshore oil production, which will help offset problems in the onshore sector.
While output would remain well below pre-2020 levels, the end of this decline, the report postulates, will remove a key hurdle affecting overall Gross Domestic Product (GDP) growth.
“In fact, this is the key reason why we expect growth to increase from 2.5% in 2023 to 3.3% in 2024,” he emphasized.
Fitch has generally predicted that the country’s economy could continue a slow growth trend into 2023 due to activities leading up to next year’s general elections.
The report said the economy would likely recover in 2024, with growth rising to 3.3 percent.
The report estimated that economic growth in Nigeria fell to a six-quarter low of 2.3 percent in the fourth quarter of 2022, predicting that the country’s economic growth would moderate further in 2023.
According to Fitch, growth in the agricultural and retail sectors has improved somewhat, but explained that, in total, “we expect growth of just 2.7 percent in 2022 (a slight revision from our previous forecast of 3.0 percent and 2.5 percent). ). in 2023,” he noted.
On a second note, Fitch said, he expects the disruptions associated with the February 2023 general election to create another headwind. “The campaign will prevent some economic activity, while government policymaking will essentially shut down,” he predicted.
Drawing on data from the past, the research organization said that in 2015 and 2019, year-over-year growth in the quarter containing a general election was, on average, 1.1 percentage points weaker than in the previous quarter.
While the growth trend will slow ahead of the 2023 vote, Fitch noted that it still expects growth to slow from 2.0% in Q4 2022 to 1.5% in Q1 2023.
“The impact on economic activity, of course, would be much greater if the elections trigger large-scale protests or violence,” he stressed.