Spanish macroeconomic intelligence provider, FocusEconomics, has warned that Nigeria’s economy faces serious fiscal risk over fuel subsidy removal as well as the Naira redesign policy by the Central Bank of Nigeria.
In its April 2023 Consensus Forecast report, FocusEconomics, said the Nigerian government’s postponement of subsidy removal and the cash shortage – induced by the Naira redesign policy of the Central Bank of Nigeria (CBN) – that gripped the nation’s economy could cause fiscal risk which includes macroeconomic shocks, financial crises and commodity price shocks.
Recall that the Federal Government had planned to remove fuel subsidies in January 2022, but it postponed the decision for 18 months till the end of the second quarter (Q3) 2023.
“Failure to scrap the 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,” analysts at FocusEconomics wrote.
It was also said that the country’s economic growth has been burdened by its oil sector, with the latter declining by 13.4 per cent in the fourth quarter of 2022 – although its fall is below the 22.7 per cent dip recorded in the third quarter of last year.
“Nigeria’s oil sector has continued to be a drag on overall growth, albeit less so than in previous quarters. In the fourth quarter, the sector posted a 13.4 per cent decline, a more moderate contraction than the third quarter’s 22.7 per cent plunge.