Nigeria’s economy is projected to grow slightly below 2 percent in 2018, largely driven by non-oil industry and services, according to the World Bank Nigeria’s bi-annual Economic Update released on Wednesday. Titled Investing in Human Capital for Nigeria’s Future, the World Bank, in the report raised concerns that, Nigeria, like many other countries, has underinvested in human capital and remaains very low compared to other countries. The World Bank also notes that Nigeria’s emergence from recession remains sluggish, and sectoral growth patterns are unstable.
In the second quarter of 2018, the oil sector contracted by 4 percent, the usually-resilient agricultural growth slowed significantly to 1.2 percent as well, impacted by the security challenges in the Northeast and Middle Belt regions.
But the non-oil industry and services, which constitutes over half of Nigeria’s economy, picked-up to 3.1 percent and 2.1 percent respectively, driven by growth in construction, transport, and ICT. The Update reports that the Nigerian economy remains dependent on the small oil sector (under 10 percent of GDP) for the bulk of its fiscal revenues and foreign exchange earnings.
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Although oil revenues are increasing with recovering oil prices in 2018, distributions from oil revenues to the three tiers of government are constrained by the petrol subsidy and other prior deductions. In the first half of 2018, the current account surplus surpassed 4 percent of GDP, driven largely by higher oil exports, while non-oil revenue collections have come in lower than envisaged. Despite sustained efforts to improve the business environment, Foreign Direct Investment (FDI) inflows remain stagnated, the World Bank said. According to the update, the fiscal deficit will likely widen in 2018 due to increased spending and sustained revenue shortfalls.
But the current account balance is expected to remain positive, benefitting from the rising value of oil exports and limited growth of non-oil imports. “The capital account faces significant uncertainty, as externa portfolio investors may exercise further caution, especially during the pre-election period, despite rising domestic yields,” the Bank warns.
The Bank, however, commended the government for establishing a Human Capital Working Group to develop a unified vision for human capital development and drive implementation of interventions within the Investing in our People’ pillar of the Government’s Economic Recovery and Growth Plan (ERGP).
The World Bank welcomed the Government of Nigeria’s recent ‘Call for Action’, requesting all stakeholders to join the Government’s effort to address Nigeria’s alarming human capital outcomes,” said Rachid Benmessaoud, World Bank Country Director for Nigeria. “As a member of the Human Capital Working Group, the World Bank stands ready to support the Government of Nigeria in its bold steps to improve the lives of its citizens.” Given the clearly challenging economic backdrop, the World Bank suggests certain key policy reforms would be important to support macroeconomic resilience for Nigeria. These include among others, the acceleration of the economic diversification agenda, the reform of petrol subsidy regime to improve the fiscal space, improvements in the domestic revenue (particularly non-oil) to reduce volatilities in government revenues and increased investment in human capital for a truly sustainable growth.
Onyinye Nwachukwu, Abuja
