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Nigeria's Economic Recovery: Defining The Path For Economic Growth

Reviews & Outlooks	5555 VIEWS
Reviews & Outlooks
5555 VIEWS

Wednesday, November 08, 2017 08.25AM / PwC

Nigeria's economy exited recession by the second quarter of 2017. An improvement in real GDP, and performance across several other macro-indicators suggest that the economy is on track for a broad-based recovery.

Our latest report, Nigeria's economic recovery- Defining the path for economic growth, develops three scenarios that show Nigeria's potential economic performance over the next five years.

In these scenarios, we examine the impact of political shocks, the implementation of structural reforms and economic diversification on key economic indicators in Nigeria.

Our analysis assumes that oil continues to be the main driver of fiscal and export revenues over the forecast period. As such, the extent to which the Nigerian economy moves towards its near-term development aspirations is dependent upon the success of its import substitution policies.

Nigeria’s economy has turned a corner

The oil price shock which started in mid-2014 severely affected the Nigerian economy. In 2015, the economy slowed sharply as annual real GDP growth declined to 2.7%y/y from 6.2%y/y in 2014. By 2016, the economy recorded its first recession since 1991, recording a growth of -1.5%y/y as oil production shortages exacerbated the decline in the oil price. Notably, the underperformance in the oil sector spilled over to the non-oil sector through the exchange rate channel, with the non-oil sector contracting 0.2%y/y to record its worst performance since 1985.

By Q2’17, the Nigerian economy exited recession recording a positive growth rate of 0.5%y/y. The recovery was in part due to a sharp recovery in the oil sector, driven by an improvement in oil prices and production volumes. In addition, the non-oil sector recorded a positive growth for the second consecutive quarter, spurred by ongoing recovery in the manufacturing sector due to improved foreign exchange (FX) liquidity. Asides the improvement in real GDP, the performance across several other macro-indicators suggest that the economy is on track for a broad-based recovery.

Nigeria's economic growth prospects – three scenarios
We have developed three scenarios that show Nigeria's potential economic performance over the next 5 years. In these scenarios, we examine the impact of political shocks, and the implementation of structural reforms and economic diversification on key economic indicators in Nigeria. In our analysis, we assume that oil continues to be the main driver of fiscal and export revenues over the forecast period. As such, the extent to which the Nigerian economy moves towards its near-term development aspirations is dependent upon the success of its import substitution policies.

To read the full report, click the download button below:

Click here to download

References

For an in-depth discussion, please contact any of the persons below:

Dr. Andrew S. Nevin (Ph.D)
Partner/Chief Economist
andrew.x.nevin@pwc.com

Adedayo Akinbiyi
Senior Manager/Economist
adedayo.akinbiyi@pwc.com

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