Nigeria Economic Outlook
Annual economic growth accelerated in Q2 thanks to sturdier activity in the agricultural and services sectors. On the flip side, the industrial sector swung into contraction, and the oil sector shrank at a sharper rate. Shifting to Q3, available data points to resilient growth. Relative to Q2’s average, credit growth picked up steam in July, while oil production grew at a sharper annual rate in July–August. That said, inflation rose in July and August due to a plummeting naira and higher petrol prices, following a battery of reforms at the end of Q2. Soaring price pressures weighed on private sector conditions throughout the quarter, according to PMI data. Meanwhile, in late August, the national oil company NNPC received a USD 3 billion crude oil repayment from Afreximbank (African Export-Import Bank), which will help stabilize the naira, thus reducing fuel costs.
Inflation came in at 25.8% in August, up from July’s 24.1%. The acceleration was broad-based, and stemmed from a weak naira and the removal of fuel subsidies in May. These factors are set to continue driving up inflation during the remainder of the year. Monetary policy and fuel prices are key factors to watch ahead.