UPDATED: Oil, agriculture to move Nigeria’s economy up to 1.9% in 2018 – IMF

Gains from crude oil output and prices, as well as improved activities in the agricultural sector will help Nigeria’s economy pick up to 1.9 percent growth in 2018 after the 0.55 percernt second quarter weak rebound, says the International Monetary Fund (IMF).

The IMF however notes that though Nigeria’s growth will remain fragile at 0.8 percent in 2017, it will overtake South Africa, projected to grow by 0.7 percent this year and then 1.1 percent in 2018.

But the fund in its latest 2017 World Economic Outlook ((WEO) warns that policy implementation, market segmentation in the foreign exchange market that remains dependent on Central Bank interventions (despite initial steps to liberalise the foreign exchange market) and banking-system fragilities, could weigh on activity in the medium term.

“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 recovering 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.

With a 0.55 percent growth, and helped majorly by improved crude production and international prices, Nigeria emerged from its 15 moths recession in the second quarter of 2017 but there 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.

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.

According to the IMF, 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.

The government has developed an Economic Recovery and Growth Plan,(ERGP) with which it targets an ambitious 7 percent growth by year 2020.

Udoma Udo Udoma,the Minister of Budget and National Planning, assured on Tuesday, that the Federal Government will ensure it meets the target, working closely with the private sector, to achieve faster economic development and even attract more capital into the economy .

“Nigeria is going to have stronger growth this year because agriculture and oil production are doing better but there are still downsides and there is still a lengthy adjustment to lower oil prices ahead,” Maurice Obstfeld, IMF Economic Counsellor and Director of Research Department, said, briefing journalists on the WEO report.

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 its April forecast, though with sizable differences across countries.

“What we see in the headline numbers is growth this year and better outcome which is largely driven by the larger economies, such as Nigeria South Africa and Angola, where one of the factors that had being laying on growth and allowing for a somewhat better outcome, but not necessarily a strong one, in particular with the case of Nigeria, stronger oil production after the problems and anticipating better agricultural production are playing a role, likewise in South Africa, a rebound in agriculture and stronger mining output are helping,” Obstfeld stated.

 

Onyinye Nwachukwu, Washington DC.