May 12, 2020

Nigeria Economic Update (Issue 16)

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.  




Related

 

Nigeria Economic Update (Issue 17)

Power sector analysis shows a decline in power generated by 8.5 percent from a peak of 3,675 mw to 3,362 mw between April 3, 2016 and April 10, 20169. This record is however still below 5,074.7 mw- the highest peak ever attained in the country. The declining power supply which has been attributed to vandalism of pipelines and gas shortages, has continued to distort economic activities in the country. With the persistent fall in electricity generation, the possibility of attaining the targeted 10,000 mw by 201910 seems unattainable. A clear strategy towards increasing power generation and curbing vandalism is urgently needed.

Nigeria Economic Update (Issue 28)

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