The shortage of the naira in recent times crippled the Nigerian economy, the United Nations has disclosed.
It stated that the informal sector felt the brunt of the scarcity the most. It noted that the continuing decline of oil production is set to impact the country’s finances in 2023.
The UN disclosed this in its ‘Trade and Development Report Update; Global Trends and Prospects (April 2023),’ report produced by the United Nations Conference on Trade and Development.
UNCTAD said, “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.
“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.”
According to the organisation, the general African economy is projected to expand 2.5 per cent, which is a drop from last year, and insufficient to curtail poverty levels on the continent. It explained that this is in no thanks to weaker external demand and tighter financial conditions.
It noted that many African economies are at risk of stagflation in 2023, with half of African countries recording double digit inflation in early 2023.
UNCTAD highlighted, “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.
“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.”
The New York-headquartered agency raised concerns that 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.
The agency added, “Overall, risks remain tilted to the downside. The rising domestic cost of living and a deteriorating security situation remain of 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.”
Recently, the UN revealed that the Nigerian economy will grow to three per cent in 2023 due to its commodities trade and consumer goods and services markets.