The World Bank has cut Nigeria’s economic growth
forecast for this year, citing weakness from oil-
output disruptions and low prices.
forecast for this year, citing weakness from oil-
output disruptions and low prices.
The bank, in its semi-annual Global Economic
Prospects report, expects Nigeria to grow by 0.8
per cent, down from an estimate of 4.6 per cent in
January. Growth could pick up to 3.5 per cent in
2017, it said.
Foreign exchange restrictions, fuel shortages and a
plunge in oil production and prices had hit the
economy, the World Bank was quoted by Reuters to
have stated in the report.
The country’s economy contracted for the first time
since 2004 in the first quarter of this year and the
Governor, Central Bank of Nigeria, Mr. Godwin
Emefiele, warned in May that a recession was
imminent after a four-month delay in the nation’s
budget stalled economic stimulus programmes.
Faced with the oil price slump, the key source of
government revenue, the central bank has restricted
access to foreign exchange. The country has held
its currency, the naira, at 197-199 per dollar since
March 2015, unlike some other oil producers that
have let their currencies weaken.
The CBN’s Monetary Policy Committee had two
weeks ago, after its meeting, announced plans to
adopt a flexible exchange rate. But the blueprint for
the proposed policy has yet to be released, putting
further pressure on the naira at the parallel market.
The country is currently plagued by oil supply woes,
as a resurgence of attacks by militants on oil and
gas facilities in the Niger Delta has driven crude
output to its lowest level in nearly three decades.
The Africa and Middle East Economist, Bloomberg,
Mark Bohlund, in a new report, said the Nigerian
economy was at risk of experiencing its first full-
year recession since 1987, after output contracted
by 0.4 per cent in the first quarter from a year
earlier.
He said a drop in oil output to a 27-year low and
paralysis in other sectors due to fuel and foreign
exchange shortages meant that economic growth
was likely to remain negative for the rest of this
year.
The naira devaluation is unlikely to help much, with
its beneficial impact expected beyond the end of
this year, he said.
Bohlund said, “The first quarter contraction does not
come as a surprise, but the drop in oil production
was actually less damaging to activity than
anticipated, dragging on real Gross Domestic
Product growth by only 0.2 percentage point in the
period compared with 0.7 percentage point in the
fourth quarter and 0.6 percentage point in 2015.
“Instead, it was manufacturing that experienced the
sharpest drop in activity, falling by seven per cent
year over year. This is likely to have been partly
connected to a decline in domestic demand but
also to the difficulties of importing input materials
due to foreign exchange controls.”
