Against the headwinds

• Published date: 09 January 2023
• Publication title: Nigeria - The Nation

2023 looks challenging. How will Nigeria cope with a looming global recession and the threat of a corresponding inflation amid a tensed political transition? Assistant Editor Nduka Chiejina reports

The year may be tough for Nigeria. Several factors will play out to shape narratives in the year. These include inflation, issues around debt, revenue accretions, funding of SMEs on the one hand and the recovery of COVID-19 loans to indigent Nigerians on the other, among other issues that will definitely play out in the year.

The International Monetary Fund (IMF) and Fitch have predicted a difficult 2023. IMF Managing Director Kristalina Georgieva predicted that 2023 would be tougher than 2022. 'We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like recession for hundreds of millions of people,' she added.

The reason for her prediction is that 'the three big economies - the US, EU and China - are all slowing down simultaneously,' she said.

Coming home to Nigeria, Fitch Solutions Country Risk and Industry Research report predicted that the 'Nigerian economy will continue to slump in 2023 due to activities leading to the general elections next year, but would likely pick in 2024, with growth rising to 3.3 per cent'.

In 2023, Nigeria will most likely finally come to terms, that its days as a major oil player is in its twilight. Having failed to reap the benefits of the oil windfall which other oil producing countries enjoyed because of alleged oil theft and the scandalous petrol subsidy, it will take a near miracle for the Buhari administration and the one that will come after it a difficult time to build back the trust deficit the country suffers in the oil and gas sector.

The Central Bank of Nigeria (CBN) will also try to fight inflation, but as its last three Monetary Policy Committee (MPC) decisions have suggested, it is unlikely it strays too far from the decision of the US Federal Reserve.

Fiscal imperatives

The fiscal authorities have dropped the ball several times. They have boxed the system into a debt trap which will have the incoming government grappling with a N77 trillion debt burden from the first day in office.

To address the debt crisis, both the Buhari administration and the incoming government will have to be smart about generating revenue to mitigate the debt crisis. While the Debt Management Office (DMO) has been assuring Nigerians that the country's total debt portfolio is within acceptable threshold, many ordinary Nigerians and experts do not seem to agree.

Before the debt grows to N77 trillion mid year, trillions of Naira would have been spent to service debts. In simple terms what this means is that money that should be spent on social services will handed down to creditors.

As a remedy, the Federal Government will be chasing revenue vigorously in the year. Apart from the revenue options being exploited by the government, in 2023, the fiscal authorities will, 'bringing capital gains from acquiring and disposing of interests in Cryptocurrencies, Digital Art and other Digital Assets into the Tax Net; ensuring under-taxed/not-taxed sectors, taxpayers, etc. are brought into the tax net in line with laws and regulations; and clarify that 35 percent of Electronic Money Transfer Levy receipts should be paid to Local Governments' according to the Finance Minister, Zainab Ahmed.

Another new revenue option...