The Nigerian economy is experiencing mixed fortunes. Its low level of oil production does not allow it to benefit fully from the rise in oil prices. The current account balance is expected to return to a surplus this year, though the persistence of a rigid exchange rate regime continues to weigh on the economy’s attractiveness and the availability of liquidity in dollars [...]
After declining 1.9% in 2020, Nigeria’s GDP is unlikely to rebound but mildly in 2021 due to persistent and significant macroeconomic imbalances. Despite the first signs of stabilization, inflation is still very high, and several adjustments to the naira have failed to correct the dysfunctions in the foreign exchange market. Although the rebound in oil prices should help reduce somewhat the squeeze on external liquidity, it will surely take more than that to restore the confidence of investors [...]
Nigeria’s economy contracted by 1.8% in 2020 due to the pandemic and the downturn in oil prices. The prospects of a rebound are slim, with growth expected at 2.5% in 2021 according to the IMF. The lack of visibility over the evolution of exchange rate regime is one of the main factors curbing growth. The Finance Minister recently declared that the government was going to use the Nafex rate, the market’s benchmark exchange rate, implying a 7.5% devaluation of the official exchange rate [...]
Although the pandemic is well contained from a health perspective, the Covid-19 crisis combined with the downturn in oil prices will have severe economic consequences. With no real fiscal leeway, the government has implemented a very modest economic stimulus plan, while massive capital outflows and the collapse of oil exports have fuelled the rapid erosion of foreign reserves, bringing the naira under pressure [...]
The sub-Saharan Africa’s largest economy is having hard time to recover. External rebalancing has showed some progress. But imports remain well below pre-crisis levels. In addition, the rebuilding of FX reserves is being accompanied by increased financial vulnerability, which puts pressure on monetary policy as the authorities give the priority to exchange rate stability. Weak public finances are an additional constraint [...]
Nigeria is having a hard time recovering from the 2014 oil shock. Although the economy has pulled out of recession, growth remains sluggish at 1.9% in 2018. Moreover, the central bank’s recent decision to cut its key policy rate is unlikely to change much. With inflation holding at high levels, it is still too early to anticipate further monetary easing. Defending the currency peg is another constraint at a time when the stability of the external accounts is still fragile [...]
Nigeria is slowly exiting recession thanks to the rebound in oil production and the upturn in crude oil prices. Forex reserves have virtually doubled since end-2016, the spread between the new benchmark exchange rate and the official rate has narrowed, and the risks of further pressure on the local currency seem limited in the short term. Even so, the situation is still fragile. Public finances are constrained by the very low revenue base and the high cost of domestic debt [...]
