• Friday, June 21, 2024
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Nigeria’s economy will probably contract 1.8% in 2016-IMF


Nigeria’s economy will probably contract by 1.8 percent this year and curb growth in the entire region, the International Monetary Fund has said.

The Washington-based lender cut its 2016 growth forecast for Nigeria from 2.3 percent projected in April, according to its World Economic Outlook update released on Tuesday. The projection for next year was reduced to 1.1 percent from 3.5 percent.

Central Bank of Nigeria

The Nigerian economy will contract for the first time in more than two decades as it “adjusts to foreign-currency shortages as a result of lower oil receipts, lower power generation and weaker investor confidence,” the IMF said.
Gross domestic product shrunk by 0.4 percent in the three months through March as oil output and prices slumped and the approval of spending plans for 2016 were delayed. A currency peg and foreign-exchange trading restrictions, which were removed last month after more than a year, led to shortages of goods from gasoline to milk and contributed to the contraction in the first quarter.

While the economy should look better in the second half of the year, growth will probably not be sufficient to negate the outcome of the first and second quarters, Gene Leon, the fund’s resident representative in Nigeria, said in an interview two weeks ago.

Inflation in Nigeria accelerated to 16.5 percent in June, the highest in almost 11 years. The Central Bank of Nigeria, which kept its benchmark rate at 12 percent in May, will announce its next policy decision on July 26. Six of nine analysts in a Bloomberg survey forecast borrowing costs will stay unchanged.

The IMF almost halved its 2016 growth forecast for sub-Saharan Africa to 1.6 percent and cut its 2017 projection to 3.3 percent from 4 percent. South Africa’s economy will expand 0.1 percent this year and 1 percent next year, the lender said.

Source: Bloomberg