The Central Bank of Nigeria (CBN) has said the risk of yet another global recession would be extremely damaging for fragile economies that are still bogged down in the lag impact of the 2020 recession.
He fingered especially emerging market and developing economies that currently confronted with huge capital flow reversals and tightening global financial conditions.
The apex bank said this in a communique issued from its last Monetary Policy Committee (MPC) meeting held at the twilight of September.
“The broad outlook of the global and domestic economies in the medium-term remains clouded by uncertainties associated with lingering headwinds,” the bank said.
Nigeria had jumped into recession in 2020, after the country recorded two consecutive negative growths in gross domestic product (GDP) of 6.10 per cent in the second quarter and 3.62 per cent in the third quarter.
The World Bank had in a report last month said the world risks a global recession by 2023. However, in its communique, CBN highlighted the domestic headwinds, further impacting the country’s economy and creating macroeconomic uncertainties.
Chief among the lingering global headwinds is the uncertainty about the direction of the Russian-Ukrainian war, especially with the potential threat of Nuclear weapons escalation.
The threat is already sending energy and commodity prices to the roof top despite the presence of challenging unprecedented inflationary pressures.
Rise in energy cost will create a threat to economic growth and worsen inflation, World Bank analysts have said, adding that it affects economic activity and inflation through a variety of channels—with direct as well as indirect effects on energy-importing and -exporting economies.
The Russian invasion of Ukraine has already disrupted global energy markets, generating the biggest surge in crude-oil prices since the 1970s.
Another headwind is the shaky and fragile political landscapes in China, the second largest global economy expected to slide further into slow growth at 2.6 per cent, first in over 25 years for the country.
The change of guard at the Chinese highest ruling body; fate of the China-Taiwan crisis; and zero-Tolla policy for the entrenched pandemic cases in the country will all combine to slow China down significantly, are what analysts see.
There is also the fear of uncertainty about the mid-term elections in the United States amidst the potentials of a serious budget crisis and debt profile battle expected in January 2023 if the republican happens to take control of the US House of Representatives.
Global economic outlook and forecast, especially for 2023, is not looking good for Nigeria, Kazeem Bello, a global development economist, told our correspondent in a chat.
Based on analysts’ forecast, global growth, which is being projected at 2.2 per cent for 2023, might actually drop below two per cent.
Bello, who is the chief executive officer/principal partner with Afrique Capital and Equity Funds Limited, said it might ultimately result in some countries sliding into recession, especially countries from the sub-regional African economies that are already shocked by worsening economic indicators.
“I am not ruling that out because aside from the dire and compelling global outlook, Nigeria already has some intriguing and intrinsic challenges with the economy.
“The growing unemployment, the shortage of food and price skyrocketing, the inability to tame the depreciation of the Naira, expanding budget deficits, consequences of continuous revenue shrinks and the political landscapes in Nigeria,” he pointed out.
Another recession in Nigeria by 2023 may be the parting gift from this administration to the next, adding that it is almost looking like an inevitable situation.