The Nigerian economy has been under duress due to the fall in the price of oil. Following the oil price global crash in 2014, Nigeria has been one of the hardest hit economies due its over dependence on oil as its only source of revenue. China’s economic slow down as well as the US rate hike, also affected its economy adversely. As a result, Nigeria’s economic growth has declined dramatically, with its currency falling to an all time low. Investors are pulling out regularly as most of them are scared to leave their investments in the country thanks to new monetary policies. The Central Bank of Nigeria put in stringent policies to help save the Naira from falling but these backfired.
The inflation rate of the country stands at 16.5 percent, its GDP stands at -0.36 percent and the rate of unemployment increased to 12.1 percent. All these have pushed the Nigeria’s misery index to an all-time high of 47.7 percent, causing the country to have the fifth highest misery index in the world, in the first half of 2016.
Below is the Ventures Africa Weekly Economic Index, which gives you a glimpse into the recent activities in Nigeria’s economy as well as changes that could affect the economy:
A look at Nigeria’s GDP
This week, it was reported that Nigeria lost its position as Africa’s largest economy to South Africa. Nigeria’s Gross Domestic Product (GDP) has dropped to $296 billion in 2016, which is a steep fall from the $481 billion recorded in 2015.
This GDP figure was calculated using the current Naira-Dollar exchange as a result of the Naira losing its value. It is worthy to note that the Centre for the Study of the Economies of Africa (CSEA) believes that the method used in computing the figure was inappropriate.
“While the naira has significantly lost its official value since the adoption of a flexible exchange rate, estimating GDP merely with a single exchange rate figure (rather than its yearly average) cannot be regarded as an appropriate method to conclude on Africa’s largest economy. Thus, the computation is rather invalid,” a report from CSEA quoted.
However, if the value of the Naira continues to depreciate further, Nigeria could see itself losing its position to South Africa even further. This can happen if the South African Rand continues to appreciate. In the event of this, the government will be forced to re-evaluate its policies in order to save the country’s economic state.
What happened to the Naira this week?
The Naira appreciated (week-on-week) slightly, by 0.3 percent to N310/$ at the interbank market. This was largely due to the CBN’s intervention to ease forex liquidity. The CBN increased the limit on dollar sale to Bureau de Change (BDCs) this week, from $30,000 to $50,000 per day. However, as of yesterday Thursday, 18th August 2016 , the Naira fell by 14 percent from N314.14/$ to N365/$ at the interbank market. This is the steepest depreciation in the interbank market since the new foreign exchange market commenced.
Did the price of crude oil change?
Between August 12 and August 19, 2016, the price of crude oil increased considerably, from $46 to $50.89 per barrel. This rise in the price of crude oil was stoked by speculations that OPEC members will agree to a production ceiling during a meeting scheduled for the 26th to 28th of September, 2016. It also rose as high as 13 percent since Thursday 18th August 2016 after Saudi Arabia said that OPEC was ready for an output freeze deal with producers outside the group.
How low is Nigeria’s external reserve?
For the week under review, Nigeria’s external reserve declined by $166 million to $25.81 billion as of August 15th 2016. The pressure on the reserve may be due to the fall in oil export revenues owing to weak export demand for Nigeria’s crude oil, occasioned by concerns over production disruptions caused by Niger Delta Militant attacks on oil facilities.
