Nigeria: Low oil prices drive growth in Q4 to weaken to 1999 levels
March 8, 2016
A perfect storm is brewing for Nigeria’s economy as the fall in oil prices has led to severe dollar scarcity, high inflation and low government revenues. This situation was exacerbated by the ongoing military conflict against Boko Haram, heightened volatility in international financial markets, the slowdown in China, power outages and political inaction due to the delay in appointing the new cabinet following March’s elections. Against this backdrop, the economy expanded 2.1% annually in Q4 at basic prices, which was below the 2.8% rise tallied in Q3. In fact, growth in Q4 decelerated to levels last seen in 1999. At market prices, the economy expanded 1.8% annually in Q4, which was down from Q3’s 2.8% rise.
According to the National Bureau of Statistics (NBS), Q4’s deceleration mainly reflected a sharp contraction in the oil sector, which plummeted 8.3% annually in Q4 (Q3: +1.1% year-on-year). The decline in oil prices observed at the end of 2015, coupled with slightly less crude production, led the fall in the this crucial economic sector. While activity in the non-oil sector was broadly stable, its potential remained limited due to an artificially strong naira and scarcity of hard currency. Dynamics in the manufacturing industries improved mildly in Q4 (Q3: -1.8% yoy; Q4: +0.4% yoy), while domestic trade recorded small gains (Q3: +4.4% yoy; Q4: +4.7% yoy). Activity in the construction sector remained negative (Q3: -0.1% yoy; Q4: -0.4% yoy), while dynamics in the information and communication, real estate and the financial sectors moderated slightly in Q4.
In the full year 2015, Nigeria’s economy expanded 2.8% at basic prices (2014: +6.2) and 2.7% at market prices (2014: 6.3%). More detailed national accounts data, including information for GDP by expenditure, will be released later in March