Africa Development Bank (AfDB) said on Tuesday that Nigeria’s weak economic growth is weighing down, not just on West Africa but overall Africa’s performance.
The bank, however, acknowledged that economic activities in the continent are largely driven by activities in Africa’s largest economy which had seen a rebound after a difficult 2016 recession, but is even more worried that growth remains fragile.
The Bank indicated this in its 2019 Economic Outlook for Africa and West Africa just launched in Abuja.
Nigeria’s economy advanced 2.4 percent year-on-year in the last quarter of 2018, following a 1.8 percent expansion in the previous quarter, beating market expectations of 2.1 percent.
The growth was the highest rate since the third quarter of 2015, as the non-oil sector increased further and the oil sector contracted less. The National Bureau of Statistics reported an annual 1.9 percent expansion for 2018, up from 0.83 percent in 2017.
“Africa’s growth pattern mimics that of Nigeria,” said Ebrima Faal, SeniorDirector – Nigeria Country Director said in his opening speech at the launch.
Africa’s GDP expanded by 3.5 percent in 2018 and projected at 4 percent in 2019 and 4.1 percent in 2020.
This is though higher than projections from per emerging markets and developing economies.
In 2016, Africa grew at 2.1 percent, and about 3.5 percent in 2017.
But without incorporating Nigeria’s figures, the continent grew by as much as 3 percent in 2016; about 3.8 percent in 2017; 3.4 percent in 2018; and is expected to expand by about 4.2 percent in 2019 and then 4.5 percent in 2020.
Low commodity prices, shrinking agricultural output, ebola crisis which some say the impact was quite minimal and may not have accounted much accounted for low growth levels in the continent. There is also the question of insecurity, as well as currency depreciation.
“Shocks from reduced commodity prices and tighter global financial conditions, which are exacerbated by underlying domestic pressures arising from policy uncertainties, adverse weather conditions and security challenges, have all continued to weigh down on the economies of Africa,” Faal added.
The AfDB finds in its second report on West Africa Economic Outlook projects that regional growth would average about 3.6 percent in 2019 and 2020, based on gradual recovery of commodity prices, especially gold, cocoa, cashew nut, iron ore and oil prices, as well as improved production.
“Nigeria’s dominance in the region continues to overshadow other smaller economies and determines the economic performance of the region.”
“The good news is that Nigeria has recovered from the last recession. This will have positive spillovers for the region’s growth trajectory over the short to medium term, particularly with the successful conduct of the 2019 general elections.”
The report further finds that countries in the West Africa Economic and Monetary Union (WAEMU) enjoy relatively low inflation, mainly due to the peg of their currency to the euro, but that non WAEMU countries continue to struggle with macroeconomic instability, seen in high
inflation and large fiscal deficits and rising debt.
The AfDB is particularly worried that high external debt which rose to 23.6 percent of GDP at the end of February 2019 remains a major concern in the West Africa region and that debt service has been a major issue confronting most countries there.
According to Faal, “average external debt is rising in the region and has almost doubled over the past six years to 23.6 percent of GDP at the end of February 2019 compared with 13.5 percent in 2013, this has increased the burden of servicing the debt”.
Anthony Simpasa, Lead Economist-Nigeria Country Department in his presentation advised that African countries must now be prudent in their spending and ensure that debt when incurred are used for productive investments. to avoid falling into debt traps.
“As interest rates rises, debt service rates rises also, so we encourage prudence in future borrowings”, he added.
Simpasa, speaking on the level of unemployment, said industrialization and manufacturing sectors offer great potential for job creation, calling them pillar on which job creation can be anchored in Africa.
James Wahome, lead Economist, West Africa Regional Department said that there is need for countries’ policy makers to focus on building productive capacity and ensure enhanced consistency between natural and regional policies.
“All countries should accelerate consultation with respect to the Africa continental free trade area and promote development of the regional industrial cluster on economic zone”.
He added that the progress recorded in some countries of the region remains insufficient in addressing the developmental challenges of the region, adding that debt servicing of West African countries poses a major challenge.
Zainab Ahmed, minister of finance said the report notes that dependency on a few export commodities to spur growth and vulnerability in commodity prices has impeded most African economies from sustaining growth.
“Nigeria has emerged strongly from the unfortunate economic recession of 2016, the recession highlighted the vulnerability of the economic to over dependency on oil as major source of revenues and foreign exchange. The problem of price volatility was compounded by incessant
attacks on oil facilities, resulting in reduced oil production”.
Mamood Isah, permanent secretary, representing the minister said that apart from the massive support for agricultural transformation, Nigerian government is also committed to the accelerated growth of the manufacturing sector.
“Our investment and reforms in the energy sector are consistent with the recommendation contained in the Africa Economic outlook 2019, notably the need to consolidate regional power pool across the continent and strengthen the regulatory bodies and frameworks”.
“The government is also committed to improving the business environment in order to create incentives for private sector productivity and competitiveness, besides the ongoing infrastructural development in power and transport sector, there are improvements in
the process of business registration aimed at encouraging local and international investors”, he added.
Onyinye Nwachukwu, Abuja
