Data released by the National Bureau of Statistics indicates that Nigeria’s real Gross Domestic Product (GDP) grew by 0.11% in Q4 20201. Further disaggregation shows that the oil sector contributed 5.87% to total real GDP while the non-oil sector contributed 94.13% during the period. Although the growth rate in Q4 2020 is lower than the corresponding quarter of 2019 which was 2.55%, it represents a 3.74% improvement over the previous quarter (Q3 2020). More importantly, it is the first positive quarterly growth since the economy contracted in both the second and third quarters of 2020, thereby ending the recession experienced due to the pandemic. The growth reflects the gradual return of economic activities following the resumption of movements which limited commercial activities in the previous quarters. Considering that economic activities are returning to pre-COVID levels and COVID vaccination is underway, economic expansion is expected in the near term. However, the size of the expansion will depend on the spending choices of the government as it responds to the new and evolving challenges. As such, budgetary allocations to sectors capable of delivering an inclusive recovery such as the agriculture sector should be prioritized.
March 5, 2021
Nigeria Economic Update (Issue 8)
The Naira sustained its appreciation trajectory at the parallel market in the review week. Precisely, naira gained 13.3 percent (Week-on-Week) to exchange at N390/$ on March 24, 2017. Reduced pressure on the naira followed moderation in speculative activities as a result of increased forex sales and intervention by the CBN (daily intervention of $1.5 million at the interbank market.) The aim of CBN interventions (narrowing the gap between interbank and parallel market rates) seems to be on course with the continued appreciation of the naira at alternative markets. While current approach of the apex bank proves effective in improving international value of naira in the short term, however, it is expedient that the bank articulates clear and credible flexible exchange rate policy to sustain the momentum and enhance confidence in the forex market in the medium term. Nonetheless, the sustainability of the exchange rate gains is partly dependent on the prospect of crude oil price and production which is outside the purview of the monetary authorities.