The Central Bank of Nigeria (CBN) reported on August 10, 2023, that the country’s economy grew by 3.3% in 2022, up from 2.7% in 2021. This is, indeed, the second consecutive year of positive growth for Nigeria’s economy, which had contracted in 2020 due to the coronavirus.
The CBN attributed the growth in 2022 to three factors: (1) an increase in oil production, (2) a rebound in non-oil exports, which grew by 20% in 2022, and (3) a gradual recovery in domestic demand as businesses reopened and consumers began to spend more.
Indeed, Nigeria's oil production increased in 2022, rising to an average of 1.8 million barrels per day (bpd) from 1.5 million bpd in 2021. There was an increased investment in oil production because both, the Nigerian government and oil companies partnered to increase oil production, which helped to boost the economy. And oil prices rose last year, which made it profitable for oil companies to produce oil in Nigeria.
Global demand for Nigerian exports, such as agricultural products, oil and gas, and solid minerals, was strong in 2022. The Nigerian government made some progress in improving trade facilitation in 2022, which made it easier for businesses to export goods from Nigeria. This included the establishment of a single window for trade clearance and the simplification of export procedures.
Moreover, the depreciation of the Naira made Nigerian exports more competitive in international markets. This was because Nigerian exporters could sell their goods for less in foreign currency, which made them more attractive to foreign buyers. Non-oil exports are important for diversifying the Nigerian economy and reducing the country's reliance on oil. The rebound in non-oil exports also helped to boost the country's foreign exchange reserves and reduce the trade deficit.
The Nigerian economy has been recovering gradually in recent years, after a period of recession in 2020. This has led to an increase in employment and income, which has boosted domestic demand. Furthermore, the Nigerian middle class is growing rapidly, and this is also contributing to the recovery of domestic demand. Middle-class consumers have more disposable income to spend on goods and services, which is boosting demand in the economy. The recovery of domestic demand has been essential for the long-term growth of the Nigerian economy. By boosting demand, it can help to create jobs, increase incomes, and reduce poverty.
The CBN also noted that inflation remained elevated in 2022, averaging 18.8%, but it declined from a peak of 20.1% in May 2022. The CBN said it expects inflation to continue to decline in 2023, but it will remain above the central bank's target of 6%.
While the CBN's report is a positive sign for the Nigerian economy, there are still challenges ahead. The country's debt burden remains high, and unemployment is still a major problem.