UNCTAD reiterates naira shortage dealt a blow, coupled with weaker external demand
By Jeph Ajobaju, Chief Copy Editor
Naira supply shortage for three months between December 2022 and March 2023 hobbled the Nigerian economy, the United Nations Conference on Trade and Development (UNCTAD) has affirmed, a view already well expressed in the country.
UNCTAD said the informal sector felt the brunt of the scarcity the most and alerted the continuing decline of oil production will impact Nigeria’s finances in 2023.
The disclosures are in the latest UNCTAD report on “Trade and Development Report Update; Global Trends and Prospects (April 2023)”.
“In Nigeria, a shortage of cash, triggered by the replacement of the highest denominations of the country’s currency, hobbled the economy, especially the informal sector,” the report noted.
“Meanwhile, the continuing decline of oil production, accompanied by large-scale oil theft, poses a main threat to strained finances in Africa’s most populous nation.”
UNCTAD said the general African economy is projected to expand 2.5 per cent in 2023, a drop from last year’s figure, and insufficient to curtail poverty levels on the continent.
It blamed this on weaker external demand and tighter financial conditions, and warned many African economies are at risk of stagflation this year, with half recording double digit inflation in early 2023.
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Inflation spikes
“In many instances, these recent inflation spikes relate to the continuing depreciation of several African currencies in early 2023 – often following a loss in 2022 of 10-30 per cent of their value vis-à-vis the dollar,” UNCTAD said, per The PUNCH.
“Public debt, in many cases standing at levels not seen since the early 2000s, is another worry across the continent. Out of the 38 African countries that are part of the Debt Sustainability Framework of IMF and World Bank, 8 entities are already ‘in debt distress’, while 13 are considered ‘at high risk’ of distress.”
UNCTAD, based in New York, expressed concern many African economies are approaching a maturity wall as maturities on international bonds issued in the previous decade peak in 2024 and will remain elevated for the next decade, with most governments unable to tap international capital markets to roll over maturing debts.
“Overall, risks remain tilted to the downside. The rising domestic cost of living and a deteriorating security situation remain a key concern in many parts of the continent. More than 116 million African people are currently in acute food insecurity according to the latest projections of WFP and FAO.”
UNCTAD recently predicted the Nigerian economy will grow 3 per cent in 2023 based on its commodities trade and consumer goods and services markets.