Nigeria's Unemployment Rate Projected to Hit 37% - NESG

19 January 2023

The group said that inflationary pressure is expected to remain elevated, driven by structural, cost and monetary factors

The Nigerian Economic Summit Group (NESG) has projected that the country's unemployment rate will hit 37 per cent in 2023.

The group in its 2023 Macroeconomic Outlook report titled "Nigeria in Transition: Recipes for Shared Prosperity, said the country's poverty headcount will also rise to 45 per cent.

According to the report, due to weak performance in the job-elastic sectors, and low labour absorption of sectors that will drive growth, the nation's population growth estimated at 3.2 per cent will lead to a decline in real per capita income.

The report noted that the country's GDP growth is also expected to moderate to 2.98 per cent, as economic growth will be subdued in 2023 due to strains on investment and low productivity in critical sectors.

"The services sector will drive economic growth, but this growth will not be strong enough to generate significant jobs," the report said.

As a result, it said unemployment will remain unabated while economic growth will be supported by election-related spending and improvement in the oil sector.

The report further revealed that the country's inflation rate will average 20.5 per cent in 2023.

"Inflationary pressure is expected to remain elevated, driven by structural, cost and monetary factors.

"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.

Investment

The report noted that in 2023, foreign capital inflow will decline. 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 reserve to US$34.9 billion at the end of 2023. The decline in forex supply will further support exchange rate depreciation," it said.

It noted further that monetary policy tightening will continue, the lending rate will remain high, and investment will be constrained. According to the report, Nigeria's sovereign risks are expected to remain a concern in 2023.

"The budget underscores fiscal deficit expansion and the upward trajectory in public debt stock to N53.8 trillion," the report said.

"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."

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