Underinvestment arising from the extended delay in passing the Petroleum Industry Bill (PIB), decline in oil production occasioned by theft and vandalism of pipelines and related uncertainty over fiscal terms, among others, are masking the 7.4 percent growth target of the non-hydrocarbon sector, says Institute of International Finance (IIF) in a report.
According to the regional economic report on sub-Saharan Africa, covering also South Africa, Kenya, Ghana, Tanzania, Côte d’Ivoire and Zambia, the non-hydrocarbon sector is spearheaded by manufacturing, trade, and agriculture, which have potentials for accelerating growth in the country.
“Hydrocarbons are becoming more important in sub-Saharan Africa, and will continue to do so going forward. Oil and gas discoveries in East Africa could be a game changer over the next decade, providing revenue for much-needed infrastructure development and turning around large current account deficits,” the report noted.
Access Bank Plc is currently partnering with IIF on a two-day Africa Financial Summit in Lagos. The US based institute in the report said, “Given its rich natural resources endowment and positive demographics, Nigeria has the potential to sustain higher rates of growth if structural impediments are removed and investment opportunities are unlocked. Key to this is an improvement in infrastructure, notably in sectors such as power, energy, and transport.”
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“Despite a plethora of challenges, we expect real GDP growth to rise to 6.3% in 2014 and 6.5% in 2015 supported by robust credit growth and ongoing structural reforms. Economic performance was relatively unscathed by capital outflows between June 2013 and early 2014, registering annual growth of 6.3% in the first half of 2014,” the report further said.
Looking beyond next year’s elections, it said that any decision to ease the Central Bank of Nigeria’s (CBN) tight monetary policy will depend on the inflation outlook, the level of international reserves and the prospects for rebuilding fiscal buffers.
The report, ‘Sub-Saharan Africa: Hitting Pockets of Turbulence’, said that CBN is currently using exchange rate stability to anchor inflationary expectations, “but inflation has outpaced currency depreciation in recent years, causing an overvaluation of the naira. However, the authorities are of the view that with the dominance of oil in exports, competitiveness gains from currency depreciation are limited due to the pass through to inflation. Furthermore, they believe that power shortages, poor transport infrastructure, and security challenges are more fundamental factors undermining the country’s competitiveness.”
However, the published report released on Thursday said that consolidated fiscal accounts are expected to register a deficit of about 2 percent of GDP in 2014 and 2015, with revenue increases remaining broadly in line with expenditures.
“With high oil dependence (65% of government receipts in 2013), measures are being implemented to boost tax revenues and rebuild fiscal buffers given the vulnerability to a decline in oil prices,” it said.
Given the summary of the report, Andrew DeSouza, senior manager, corporate communications of the institute, said, “The region as a whole remains one of the fastest growing areas of the world in 2014 estimated at 4.9 percent.
