Lower oil prices, slowdown in key economies, monetary policy normalization, high inflation rate, oil production disruption, Political risk and heightened insecurity are major near term risk that would affect the growth of Africa most populous black nation, according to a report by US-based global consulting firm, Price Waterhouse Coopers (PWC).
The Nigerian economy has been hammered by a lengthy collapse in oil prices that began in mid-2014 and snowballed into a two-decade low of $28 per barrel in January 2016.
The pain inflicted by militant attacks in the Niger-delta, which sent production levels to near decade-lows of 1.2 million barrels, dealt an even steeper blow on the oil-dependent economy.
These factors tipped the economy into its first full-year contraction in 25 years and triggered acute dollar shortages that stifled the non-oil sector, as the latter contracted 0.2 percent to record its worst performance since 1984.
However, the economy managed to limp off the recession in the second quarter of 2017 after expanding 0.55 percent, on the back of a rebound in oil prices, following an agreement reached by OPEC members in 2016 to shave some 1.2 mbpd off the market to nip a growing supply glut in the bud and relaxed hostilities in the Niger-Delta
“Asides the improvements in real GDP, the performance across several other macro-indicators suggest that the economy is on track for a broad-based recovery. However, the economy is still bound to face major near term risk in 2018,” said Andrew S Nevin, partner and chief economist at PWC.
This risk are evident taking into consideration number of factors which include, failure of OPEC members to comply with production cuts agreement and increasing shale production, Slowdown in economies with strong trade relations with Nigeria particularly China, the United kingdom (UK) , the United states (US) and India.
Furthermore, the on-going monetary policy normalization in the US could lead to a reversal of foreign capital and restrict further flows, pre-election and 2018 budget spending, adjustment of petrol prices and power tariff, attacks on oil and gas facilities by militant groups in the Niger Delta region.
“Pre-election uncertainties which could elevate political tensions and leadership succession could hamper policy continuity, continuous insurgency in the Northern region,” Said Nelvin in a statement.
A barrel of Brent oil sold for $67 as of Thursday, 15 February, according to data obtained from the Bloomberg terminal. That’s a 17.7 percent increase compared to the same period last year ($56.8) and an 80 percent leap from an average of $37.28 per barrel in February 2016.
Oil production hit 1.8 million barrels daily in January 2017 according to the most recent OPEC data, representing a 50 percent increase from the 1.2 million barrels produced in the thick of militant attacks
Increased flow of petrodollars have pushed the country’s external reserves to a 35-month high of $42.8 billion as of February 2017, according to a statement made by the Central bank of Nigeria (CBN), adding to positive exchange rate expectations.
MICHEAL ANI
