The recent World Economic Outlook (WEO) report released by the International Monetary Fund (IMF) reveals that Nigeria’s economy will contract to -3.4% in 2020, falling from 2.2% projected in 2019.1 The Fund’s projection takes into cognizance the large drop in oil prices and impact of containment and mitigation measures on economic activities. The report also projects inflation to rise from 11.4% to 13.4%, government debt as a percent of GDP to increase from 29.4% to 35.3% and external reserves to fall from 6.1 to 3.9 months of import between 2019 and 2020. However, GDP and inflation are expected to rebound to 2.4% and 12.4% respectively in 2021. Going forward, the impact of the COVID-19 pandemic, through business travel and tourism, supply chains, commodities and lower confidence, will worsen the already bleak economic outlook. Nigeria’s economy will be particularly hard hit considering the intensity of the impact on China, a notable trading partner. The government should consider as priority, fiscal stimulus packages for the affected industries and workers and boost investment to accelerate recovery.
May 12, 2020
Nigeria Economic Update (Issue 16)
OPEC weekly basket price increased marginally from $45.09 on June 17, 2016 to $45.95 on June 24, 2016, while Nigerias bonny light increased from $47.61 to $48.90 (with a peak of $49.2 on June 23, 2016)within the same period. The rise in oil price, amidst downward pressures, was likely driven by expectations that the UK would remain in the EU. However, price fell (to $47.61) on June 24, 2016 following the outcome of the UK referendum (on June 23, 2016) to leave the EU. This was driven by concerns over a possible contagion effect of further disintegration on the EU (a major oil consumer) which could drive down oil demand in the longer term. In the medium term, oil prices could face further pressure as a result of rising crude oil output and attenuating production disruptions in Canada and Nigeria. Although, the recent rise in oil prices seem transient, Nigeria can benefit from the marginal rise if disruptions in oil production is quickly resolved
Nigerias domestic crude production increased significantly in April 2017. OPECs Month-on-Month data shows a 22.6 percent increase to 1.5 million barrels per day constituting the biggest increase among oil producing group. Crude production increased at the backdrop of completion of scheduled maintenance/repairs at the Bonga oil field, implying resumption of crude production by an additional 225,000 barrels. Remarkably, Nigeria is progressively moving towards meeting daily output benchmark/target (2.2 million barrels per day). Given recent boost in domestic crude oil production, considerable effort should be made to improve the countrys refining capacity in order to reduce fuel importation and conserve foreign exchange.