Nigeria can build on the oil-driven economic recovery anticipated for it in 2017 by strengthening its macroeconomic policy framework and implementing the structural reforms needed to diversify the economy and break out of a boom and bust cycle, according to the World Bank’s newly-released Bi-annual Economic Update.
In 2016, Nigeria experienced its first full-year of recession in 25 years. Global oil prices reached a 13-year low and oil production was crushed by vandalism and militant attacks in the Niger Delta, resulting in the severe contraction of oil GDP. Although the oil sector represented only 8.4 percent of GDP in 2016, lower foreign exchange earnings from oil exports had spillover effects on non-oil sectors (industry and services) dependent on imports of inputs and raw materials, and overall real GDP contracted by 1.5 percent.
Growth is forecast to return into positive territory in 2017, largely on the back of recovery in the oil sector as the government intensifies efforts to restore peace and stability in the Niger Delta, improve its Joint Venture (JV) relationships with international oil companies, and while strong growth in the agricultural sector continues. However, given the risks associated with the oil sector, recovery is fraught with a high degree of fragility and risks; notably from future shocks to the oil price or further unrest in the Niger Delta, which is not yet fully stabilized, as well as from the incomplete implementation of new JV cash call arrangements.
On the upside…
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The Nigeria B-annual Economic Update is produced by the World Bank in Nigeria, and replaces the previous Nigeria Economic Reports that were published on an annual basis in 2013, 2014, and 2015.