Nigeria Outlook 2016: "To be or not to be” – GTI Capital


Monday, February 01, 2016 12:00PM / GTI Research

‘’To be, or not to be’’ is the dilemma that confronts the Nigerian economy in 2016. The largest economy in Africa has continued to perform below its potentials given its inherent potentials.

The crash in crude oil prices, the exchange rate volatility, weak infrastructure, lack of political willpower to implement aggressive fiscal reforms, policy inconsistencies and many more are some of the major challenges that has plagued the country in the past. Our 2015 review takes a critical look at how the Nigerian economy fared in the just concluded year, analyzing the domestic economic challenges and pass through effects from other global economies. The impact of the crash in crude oil prices (over 60% decline between 2014 and 2015) weighed heavily on the Nigerian economy, clearly because of the country’s reliance on crude oil for up to 70% of its foreign exchange earnings. The impact also trickled down to exchange rate, creating a huge volatility as a result of the country’s import dependence. The effect of the heightened volatility in the country’s foreign exchange, as well as the pressure in the prices of other commodities resulted in a massive capital flight.

The Central Bank of Nigeria (CBN) came up with very harsh currency control policies to ease the pressure on the fast depleting foreign exchange reserve. The implication of these harsh currency control policies of the CBN was the eventual delisting of Nigerian bonds from the JP Morgan Index for Emerging Markets which triggered another round of capital flight in the bonds market. The year 2015 fast became a year of consequences for the Nigerian Economy.

Our outlook for 2016 clearly appreciates the challenges ahead of the country and takes an objective view of what can be done (or is being done) to help re-awaken the sleeping giant. The major focus for 2016 is the expansionary budget being proposed by the government (the largest ever in the country’s history). We took a look at the benefits of this budget to the economy, focusing on the real sector, job creation, inflation and economic diversification. We also focused on the impact of the TSA implementation and the anti-graft efforts of the government on fiscal responsibility.

Based our review of 2015 and our outlook for 2016, the options clearly available to the sleeping giant of Africa in 2016 are …to be, or not to be.




The year 2015 will go down in recent history as one filled with absolute suspense. It was mostly characterized by uncertainties in both developed and emerging market economies. The year inherited the global crude oil and commodities crises which started in the twilight of 2014 and extensively coloured business activities all over the world. This reduced capital flow into emerging markets and developing economies in the course of the year.


As a result of these challenges, global economic Institutions such as the IMF, World Bank, OPEC, OECD among others were kept on their toes. Reviews and re-valuations of economic projections were undertaken in order to provide fair and realistic estimates to crisis stricken economies.


In January 2015, at the first IMF World Economic Outlook review, the monetary body projected that the world economies; the USA, the Euro-area, China, Nigeria and the Sub-Sahara African would grow by 3.5%, 3.6%, 1.2%, 6.8%, 4.8% and 4.9% respectively. At the last review in October 2015, the projections were revised to 3.1%, 2.6%, 1.5%, 6.8%, 4.0% and 3.8% respectively as shown in Figure 1.

In other to help resuscitate ailing economies, most governments across the world especially in the Eurozone instituted bail out programs for their respective economies. This cushioned the effect on the economy and helped limit sharp currency depreciations.


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