West Africa in Focus /

Nigeria on track to meet IMF growth target

  • Nigeria seeks US$10bn financing for its energy transition plan ahead of COP27 Egypt. Secures US$1.5bn WB commitment

  • Nigeria’s economy grew faster than expected in Q2 – 3.5%. It is on track to meet the IMF’s 2022 projection

  • Cote d’Ivoire’s better-than-expected cocoa harvest drove prices lower, but weak supply outlook means high future prices

Nigeria on track to meet IMF growth target
Janet Ogabi
Janet Ogabi

Senior Research Analyst

Tellimer Research
1 September 2022
Published byTellimer Research

Nigeria’s Vice President Yemi Osinbajo is in the US to meet with the World Bank and US counterpart Kamala Harris in a bid to secure funding of US$10bn for its energy transition plan ahead of COP 27 Egypt. The current administration’s strides towards net zero are impressive, but the risk is that they will be short-lived given its term ends in February.

Meanwhile, Nigeria’s non-oil sector has continued to drive impressive GDP growth numbers for the economy. The 3.5% headline number in Q2 was faster than the rate in Q1 and beat consensus expectations. The economy could be on track to meet the IMF’s 2022 projections.

And Nigeria's surging 'Japa wave' of emigration could be yielding some positives, as workers’ remittances show a steady recovery. This is especially needed to boost the country’s external position, as oil revenues plunge.

In Cote d’Ivoire, a higher-than-expected cocoa yield is set to boost supply, leading to a decline in cocoa prices; however, the price outlook remains strong. And, in the markets, the naira depreciated over the week, dropping, again, to NGN700 against USD.

Nigeria’s early start to COP27 comes with a US$10bn price tag

Ahead of the COP27 meeting in Egypt in November, the Nigerian government, led by Vice President Yemi Osinbajo, is seeking US$10bn in funding for its energy transition plan (ETP). The government developed the ETP after COP26 and it forms the basis of Nigeria's commitment to reach net zero emissions by 2060. The US$10bn is what Nigeria estimates it needs in annual financing for the US$410bn above-the-usual spending over the next 38 years. In total, Nigeria estimates it requires US$1.9tn (including US$1.5tn business-as-usual spending) to reach its carbon-neutral target.

The World Bank is expected to be the first partner contributor with a US$1.5bn commitment and Osinbajo is currently in the US to meet with the Bank and US Vice-President Kamala Harris. As Osinbajo puts it, “for Africa, the problem of energy poverty is as important as our climate ambitions” and the ETP is an impressive step towards carbon neutrality. However, the current administration's term ends in less than a year.

Nigeria’s GDP growth beats expectations

Nigeria’s economy grew by 3.5% yoy in Q2 2022 but declined by 0.4% qoq. The annual growth was, surprisingly, faster than the 3.11% recorded in Q1 22 and beat consensus expectations of 2.7%. The growth was, again, driven by the non-oil sector (4.8% yoy, 94% of total GDP), while the oil sector recorded its ninth consecutive quarter of contraction (-11.8% yoy, 6% of total GDP). Despite the challenges around FX and inflation, the positive turnout in the transportation, ICT and financial services sectors and the slower contraction in the oil sector were beneficial.

Nigeria could be on track to meet the IMF’s 2022 growth projection of 3.4%. However, the challenges around the economy persist, as the FX crisis worsens and inflation rages on.

Non-oil sector (over 90% of GDP) drives Nigeria's economic growth

Nigeria’s diaspora remittances increase 20.3% to US$5.16bn as the 'Japa wave' rises

Data from the Central Bank of Nigeria (CBN) show that remittances from Nigerians working abroad have been steadily increasing since Q3 20, growing by 20.3% yoy in Q1 22. Moreover, the data are likely to be understated with many transactions now taking place through unofficial channels due to the CBN's restrictive FX policies.

We recently highlighted the increasing level of emigration among Nigerian professionals (the so-called 'Japa wave') and how emigrants have become important economic agents. Although the increase in remittances is welcome news, we remain sceptical about the country's dependence on income from the diaspora and it is hard to tell whether this is enough to compensate for the three-fold negative impact of the brain drain:

  1. The government loses out on the education investment it has made – university education is highly subsidised in Nigeria;

  2. As emigrants reproduce and grow their families, it is highly likely that the following generations will lose touch with their country of origin and therefore have no reason to send money back; and

  3. The country misses out on expertise and potential innovation of highly skilled and educated emigrants.

Workers' remittances into Nigeria show signs of recovery

Cote d’Ivoire's strong cocoa harvest drives prices lower, but concerns around future supply remain

Cocoa prices declined by 0.2% week-on-week as Cote d’Ivoire reported higher-than-expected production of 2.41MMT (the same level as last year). The market had expected slightly lower supply of cocoa due to poor weather conditions, high freight charges on fertilisers, trade disruptions and crop disease. Ghana, the world’s second-largest cocoa producer, reported on July 27 that its 2021/22 cocoa crop fell by -35% yoy to 685,000MT, a 12-year low, due to drought and swollen shoot disease.

Still, the market remains cautious due to expectations of poor supply in the coming year, with a shortage of fertiliser potentially denting next year's yields in Cote d’Ivoire and Ghana. Recession could also affect demand for chocolate.

Nigeria’s Academic Staff Union strike takes a turn for the worse

The Academic Staff Union of Universities (ASUU) has again extended the strike that we wrote about some weeks ago. The union cites the government’s three-pronged failure to 1) release revitalisation funds for universities, 2) release the white paper report of the visitation panel to universities and 3) deploy the University Transparency Accountability System to pay the salaries and allowances of lecturers.

It is another symptom of Nigeria's weak fiscal situation – there is limited financing for the federal government to truly cater to the educational sector. Discussions about privatising federal and state schools have intensified.

Prolonged strikes keep Nigerian students in school longer than required

The strike is also one of the factors that has been driving increased emigration – as we have highlighted, more Nigerians are now seeking higher education in the UK. Moreover, it has strengthened the case for private universities, which are more expensive and currently account for only 5% of Nigeria's undergraduates.

Upcoming events

Africa-EU Energy Partnership (AEEP) Forum 2022 – September 7

The forum aims to advance the 'green gateway' between Africa and Europe, and to discuss how to converge bicontinental energy ambitions through COP27 and beyond. It also strengthens the bond forged at the African Union-EU Summit in February 2022, where African and European leaders committed to accelerating Africa's green transition.

Senegal inflation – September 9

Senegal is set to release its inflation numbers for August, after a +200bps mom spike in inflation in July to 11%, sparked by increases in food, utility, clothing and transport prices.

Our West African research

  • Nigerian professionals, frustrated by the poor domestic economic conditions, are leaving the country en masse. Developed countries are receptive due to labour shortages and African countries, not just Nigeria, are well placed to fill the gap. Emigrants could be important economic agents for their native countries through remittances, but mass emigration can also limit economic development. We discuss the so-called 'Japa wave' in-depth here.

  • Recent weeks have been a rollercoaster for Seplat as the Mobil acquisition was approved and then rescinded. There has been no clarity on how the regulatory tussle could end, but Seplat clearly has more capacity to operate the assets. We have evaluated the possible impact on the stock.


Nigeria equities market has posted a gain of 2.0% in the past week, taking the year-to-date gain to 17%.

As interest rates pick up, local Nigerian investors are likely to exit the equities market, which explains its losing streak. Looking ahead, we expect interest in the Nigerian market to remain tepid, especially as we draw the curtains on earnings releases.

Market indicators

Tellimer's West Africa Equities Coverage

Nigeria's yield curve (%)

Ghana yield curve (%)