Suffering from rampant inflation, stalled investment and mass layoffs, Nigeria is still gripped by one of the worst economic crises in its history.
But for the first time in months, the West African economic giant is finally looking to exit its first recession in decades. On Thursday, the Nigerian Parliament approved the government’s ambitious 7-trillion naira ($23 billion) budget to “pull the economy out of recession as quickly as possible.”
The plan, bolstered by improved output in oil production and a potential World Bank loan, aims to kick-start growth through rail, ports and power projects.
In January, the International Monetary Fund (IMF) said it expected Nigerian growth to hit 0.8 percent for 2017 and 2.8 percent in 2018.
Others are more optimistic. “Growth of 2 percent (in 2017) is totally possible,” said Moody’s analyst Aurelien Mali at the rating agency’s annual West Africa conference in Lagos this week.
“Import figures suggest that after declining for two years, domestic demand picked up at the turn of the year,” John Ashbourne, an economist at Capital Economics, said in a recent note.
Ashbourne added that there were also encouraging “signs of life in Nigeria’s non-oil sector.”
The new figures are far from the boom time in Nigeria, which over the past decade had enjoyed an average annual growth of 8 percent, according to Bloomberg.
“Compared to other oil powers like Qatar, Nigeria did not prepare for rainy days,” said Douglas Rowlings, an analyst with Moody’s.
Saving for a worldwide crash in commodity prices was not under the control of President Muhammadu Buhari, who only came into power in 2015. But his tough talk toward rebel groups in the Niger Delta only served to deepen the recession, said BMI Research.
As a result of attacks on oil and gas infrastructure in the oil-producing swamplands, last year production fell to a low of 1.4 million barrels per day (bpd) and Nigeria’s growth contracted to 1.5 percent in 2016. Ongoing talks with the rebels and money in the form of amnesty payments solved the problem.
Meanwhile, Buhari’s overseas medical trips have left the more conciliatory and collegiate Vice-President Yemi Osinbajo in charge of handling negotiations with the rebels. Now production has once again risen over 2 million bpd, giving Nigeria access to foreign currency and supplying banks and businesses who were unable to pay suppliers for much of 2016.
The Central Bank of Nigeria (CBN) has eased a dollar shortage by creating a market-determined rate for investors, yet a black market for dollars persists.
“Many investors are waiting to reinvest in the country but as long as there is a parallel market, they will be hesitant,” said Moody’s Mali.
Structural reforms will be needed to improve the business climate. Compared to 2016, it will not take much for Nigeria to rebound. How much it grows depends on the price of oil, which the country depends on for the bulk of its foreign exchange.
“Nigeria's economy might not be as attractive as before but it is still very compelling in the long term,” said Rowlings.

Source: Arab News