Review of the Nigerian Economy in 2011 & Economic Outlook for 2012 – 2015
Category: Nigerian Economy
May 14, 2012
In its second year of economic projections, the NBS is also evolving in its approach to forecasting by employing an econometric model to augment results from the traditional methods of surveys and its system of administrative statistics. A Bayesian Vector Autoregressive (BVAR) model is employed to provide a baseline forecast for Gross Domestic Product (GDP), inflation and the value of total trade. Adjustments are made to incorporate the effect of the nationwide strike that occurred in the early part of January 2012, as well as the shock to the economy due to the partial repeal of the subsidy on Premium Motor Spirit (PMS).
In 2012, the Nigerian economy measured by real GDP is projected to grow at 6.50 percent, a decline in the annual growth rate compared to 2011. However, in 2013, the economy is projected to grow at a faster pace as the effects due to the partial repeal of the PMS subsidy are expected to dissipate. The economy is expected to grow at a respectable rate of 7.43 percent in 2014 and 7.25 percent in 2015.
Table 1: Historical and Projected Annual Growth rates for Real GDP, Inflation and value of total trade (%)
In 2012, inflation is projected to rise to 13.57 percent due, to some extent, to the higher price levels in the economy following the partial removal of the PMS subsidy. The BVAR model also indicates inflation rates of 12.21 percent in 2013, 12.04 percent in 2014 and 11.91 percent in 2015. It is important to note that these projected rates also depend on the responses of the Central Bank of Nigeria (CBN) through monetary policy which has set its sights on single digit inflation. In fact, the moderation in price levels in 2011 could be partially attributed to the decisions by the CBN during the period.
The Value of Total Trade for the country is expected to decline in by 11.03 percent in 2012. This is expected to be partly due to the import ban on certain food products that took effect in 2011. The decline could also be due to a decline in crude oil exports possibly due to supply disruptions that occurred during 2011. Further out into the near term, the value of total trade is expected to rebound in 2013 to 11.25 percent, followed by 20.6 percent in 2014 and 16.44 percent in 2015.
In conclusion, while shocks in the early part of 2012 may have marginally slowed economic growth, the economy is expected to rebound in 2013 and grow at respectable trends in 2014 and 2015. The projected growth rates in this report may be further accelerated due to economic reforms expected to kick-in in the near future. As the current Administration is looking to reform key sectors such as agriculture and power, coupled with increased public (capital) expenditure, these are likely to put the economy on a higher growth path.