Subdued growth in the economy for oil-rich Nigeria could be undermined if
the country’s production levels don’t recover, Moody’s Investors Service
The Nigerian Bureau of Statistics said last month the economy had slipped
into recession. A member of the Organization of Petroleum Exporting
Countries, the oil-sector contribution to total real gross domestic
product for Nigeria declined by 1.45 percent year-on-year.
Published from Dubai, Moody’s said in a report the government of Abuja
should be able to withstand some pressures, but rising inflation and other
growth challenges remain.
Between 2010-2014, inflation rate was between 6%-8% while unemployment
rate was 21%. Under President Buhari’s one year, inflation rose to 17.1%
with a 75% unemployment rate.
“The government of Nigeria continues to face low oil prices, volatile oil
production, a spike in inflation that has eroded purchasing power, foreign
exchange scarcity and an economy that has entered technical recession,”
the report read. “Moody’s projects stagnation in real GDP in 2016 and only
subdued growth at 2.5 percent in 2017.”
The Nigerian government said oil production during the second quarter
declined almost 20 percent from the previous period. Among the region’s
largest economies, Nigerian crude oil production is at a 30-year low.
Burdened already by revenue lost to lower crude oil prices, Nigeria
production is the target of a campaign from militant Niger Delta Avengers,
one of the more active groups of its kind in the region. In an open letter
to President Muhammadu Buhari, the movement said it ended its hostilities
and was now calling for a restructuring of the country. It says the
administration is sidelining the interests of the people in favor of oil
interest in the Niger Delta.
On the financial front, Moody’s said a government move to devalue the
currency could help offset some of the loss from the oil sector, but could
also push the rate of inflation toward 20 percent by the end of the year.
“We expect that Nigeria will contain pressures on its public finances in
the short term,” Aurelien Mali, a credit officer at Moody’s said in a
“However, there is greater doubt about the severity of the impact of these
challenges, particularly on government liquidity and economic growth, over
the medium term.”
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