Nigeria: Low oil prices and scarcity of hard currency prompt GDP to contract in Q1

Nigeria is on the verge of recession due to still-low oil prices, fuel shortages, restrictions on imports and the authorities’ willingness to keep an artificially-strong naira. This situation is expected to get worse going forward as crude supply has been severely disrupted by the sabotage of oil infrastructure in recent weeks. The economy fell 0.4% annually in Q1 at basic prices, which contrasted the 2.1% rise tallied in Q4. At market prices, the economy contracted 0.4% year-on-year in Q1, which contrasted Q4’s 1.8% rise.

According to the National Bureau of Statistics (NBS), Q1’s dismal performance mainly reflected a contraction in the non-oil sector (Q4: +3.1% year-on-year: Q1: -0.2% yoy). Manufacturing activity declined 7.0% annually in Q1 (Q4: +0.4% yoy) mainly due to import restrictions and the country’s controversial foreign-exchange policies. Domestic trade also deteriorated in the three months up to March (Q4: +4.7% yoy; Q1: +2.0% yoy), while activity in the construction sector remained negative (Q4: -0.4% yoy; Q1: -5.7% yoy). Dynamics in the information and communication, real estate and the financial sectors also worsened in Q1.

FocusEconomics panelists project the economy to grow 2.7% in 2016, which is down 0.1 percentage points from last month’s estimate. For 2017, panelists expect the economy to grow 4.2%.