According to figures released on Wednesday, Nigeria’s annual economic growth slowed to 2.3% in the first quarter due to the government’s decision to exchange old banknotes for new ones.
The country’s gross domestic product (GDP) data was released hours before the central bank’s interest rate announcement and next week’s inauguration of President-elect Bola Tinubu, who has promised to revitalize growth.
Following a severe recession in 2020 caused by the COVID-19 pandemic, Africa’s largest economy has grown for ten consecutive quarters.
GDP increased by 3.1% year on year in the first three months of 2022.
The National Bureau of Statistics (NBS) reports that “the reduction in growth is attributed to the adverse effects of the cash crunch experienced during the quarter.”
Nigeria issued the new banknotes in an effort to regulate the country’s cash supply, reduce inflation, and move toward a cashless society.
However, this change wreaked havoc on the country’s cash-based transactions. The policy’s full implementation deadline has been pushed back to the end of the year.
The NBS reported that annual growth in the services sector was 4.4% in the first quarter.
The oil sector, which shrank by 4.2%, accounts for roughly two-thirds of government revenue and 90% of foreign-exchange reserves.
Nigeria is Africa’s leading oil producer, with oil output averaging 1.51 million barrels per day in the first quarter of 2023, up from 1.49 mbpd in the same quarter of 2022.
Analysts predict that the central bank will leave interest rates unchanged on Wednesday, despite double-digit inflation.
