KUWAIT CITY: The International Monetary Fund (IMF), earlier in October, projected that Nigeria’s economy would be out of recession in 2017, and that the economy will also grow by 0.6 percent in 2017.
According to the IMF World Economic Outlook (WEO) released in Washington, USA, it is projected that the recession will outlast 2016 with a Gross Domestic Product (GDP) contraction of 1.7 percent. Maurice Obstfeld, IMF chief Economist and Economic Counsellor, who spoke on the outlook, said the fund forecast a slight pickup in 2017 and beyond, driven mainly by emerging market strength.
Following similar trend, the Fitch ratings also projected a 2.6 percent growth in Nigeria’s Gross Domestic Product (GDP) for 2017.
The agency hinged its projection on the more flexible FX framework implemented in June which has allowed the naira to depreciate, but the amount of dollars traded in the official market and available to the banking system and domestic industry remained limited.
Fitch’s view is that dollar liquidity will not significantly improve until market participants become more comfortable with the sustainability of the exchange rate level, which is likely to require further narrowing of the spread between the official and parallel market rates.
“Nigeria’s 2016 budget envisaged an increase in capital expenditure to stimulate the economy. However, the bulk of these disbursements has been delayed by the late adoption of the budget and the slow pace of securing external financing,” it added. It is important to recall that the country recorded a 0.36 and 2.06 percent contraction in the first and second quarters of 2016 respectively, plunging into its worst recession in 29 years.
Experts have pointed out that the recession was largely due to a number of factors, including fall in oil prices and resurgence of militancy in the Niger Delta.The experts’ positive projection has been further fuelled by expansive capital expenditure propositions in the 2017 budget and the recent outcome of the Organisation of Petroleum Exporting Country (OPEC).
OPEC reached a deal early December to cut oil production by 1.2 million barrels per day in order to raise global prices. The organisation is a cartel of 13 major oil exporters, including Saudi Arabia, Iran and Iraq, accounting for one-third of global output.
OPEC nations currently produce 33.7 million barrels of oil per day. Under the new deal, they will bring that down to 32.5 million barrels per day, with Saudi Arabia, Iraq, UAE and Kuwait making the biggest cuts.
