Nigeria’s growth to remain fragile at 0.8% in 2017, says IMF

The International Monetary Fund (IMF) says Nigeria”s growth rebound would remain fragile at 0.8 percent growth though helped by prospects of strong oil output as well as increasing activities in the agricultural sector.

The IMF which just released its World Economic Outlook report in Washington is concerned that policy implementation, market segmentation in a foreign exchange market that remains dependent on central bank interventions (despite initial steps to liberalize the foreign exchange market), and banking-system fragilities could weigh on activity in the medium term.

Helped majorly by improved crude production and intetnational prices, Nigeria emerged from its 15 moths recession in second quarter of 2017 but have been warnings that the growth remains fragile and could relapse if efforts were not put to sustain the rebound.

On May 25, 2017, OPEC agreed to extend to March 2018 the production agreement in place since January this year. The agreement entails a cut of
1.2 million barrels a day (mbd) from October 2016 production. Russia and other non-OPEC countries agreed to stick to current production, implying addi- tional cuts of about 0.6 mbd from the October 2016 level (bringing the total cuts to 1.8 mbd).

Notwithstanding efforts by the oil exporters participating in the production agreement, oil prices had fallen to less than $44 a barrel by late June, the lowest since November 2016, right before the initial production cuts were announced.

The main drivers were stronger-than-expected US shale production and stronger-than-expected production recovery in Libya and Nigeria, which are exempt from production cuts. In addition, exports from OPEC countries appeared to be sustained at relatively high levels, even with lower production.

“Nigeria is expected to emerge from the 2016 recession caused by low oil prices and the disruption of oil production. Growth in 2017 is projected at 0.8 percent, owing to recov- ering oil production and ongoing strength in the agricultural sector,” the IMF noted in its flagship (WEO) report released at the ongoing Annual meetings which it co-hosts with the World Bank in Washington.

The Fund projects economic growth in sub-Saharan Africa to reach 2.6 percent in 2017 and 3.4 percent in 2018 (broadly in line with the April forecast), with sizable differences across countries.

“Downside risks have risen because of idiosyncratic factors in the region’s largest economies and delays in imple- menting policy adjustments. Beyond the near term, growth is expected to rise gradually, but barely above population growth, as large consolidation needs weigh on public spending,” it further stated.

Global.growth, which in 2016 was the weakest since the global financial crisis at 3.2 percent, is projected to rise to 3.6 percent in 2017 and 3.7 percent in 2018.

Details shortly….

 

Onyinye Nwachukwu, Washington DC