Nigeria Economic Update (Issue 15)

Latest World Economic Outlook (WEO) report by the International Monetary Fund reveals that Nigerias economy will grow by 1.9 percent in 2018 an unchanged stance from earlier projections. However, the figure is 2.9 percentage points lower than the 4.8 percent 2018 estimated growth rate in Nigerias ERGP (Economic Recovery and Growth Plan) 2 showing a very large disparity between domestic and international growth forecasts for Nigeria. The Funds projection however seems to have taken into cognizance underlying factors that could slow growth in the medium term: faster pace of population growth relative to GDP growth3, poor policy implementation, banking system fragilities and foreign exchange market segmentation.

Nigerias Bonny light price declined by 7.1 percent from $40.19 per barrel on March 24, 2016 to $37.32 per barrel on April 1, 20162. OPEC weekly basket price also decreased by 3 percent from $35.81 per barrel to $34.74 per barrel within the same period3. The remerged downward trend in crude oil price is traceable to concerns over the likely failure of the oil production freeze deal between Saudi Arabia and Iran4. The outcome of the oil production freeze meeting which is scheduled to hold on April 17, 2016, will give further direction for oil supply regulation.

The external reserve increased week-on-week by 2 percent to $26.3 billion on January 6, 2017. The increase was likely triggered by continued marginal rise in crude oil price, which moderated oil revenue in the review week. The recent rise in crude oil price is likely to be maintained in the short term given the recent oil production cut deal by OPEC members. Thus, the Nigerian government should target short term increase in crude oil production to fully take advantage of Nigerias exemption from oil production cut and potential rise in oil prices.