In 2017, the Nigerian economy recovered from a two- year recession as Gross Domestic Product (GDP) growth increased from -0.9% in the first quarter to 0.72% and 1.4% in the second and third quarters of the year, respectively. The economy also experienced improvements in several key economic indicators such as inflation (which closed the year at 16% from 18.6% in December 2016); external reserves (which rose to over US$38 billion increasing by over 1bn in a record of two weeks in December 2017) and exchange rate, which remained relatively stable during the year. In addition, Nigeria recorded significant improvement in the World Bank’s Ease of Doing Business ranking, moving up 24 places to 145th from 169th in the previous year.
The economy continues to face serious macroeconomic challenges especially as the national unemployment and underemployment amongst the youth population rose to its worst levels yet at 40% as reported in the third quarter of 2017 implying that almost 4 million Nigerians were out of jobs in 2017. There were also disruptions in fuel supply and power shortages, and insecurity in some parts of the country especially during the festive season. Over 85 million Nigerians lived below the national poverty line, as Nigeria underperformed in the recent World Bank’s HDI Report. This points to the need for an increased focus on inclusive economic growth; to provide employment opportunities and lift millions of Nigerians out of poverty.
The economic indicators have presented a more favourable outlook for 2018 (better than the preceding years). Below are the highlights and possibilities for the economy in 2018.
1) Crude Oil Price/Production: The current international crude oil price has averaged at about $60-$62 (highest level since 2014), and is of immense value to Nigeria for budgeting and planning. The country has also benefitted from a stable oil production in the Niger-Delta of about 2.1mbpd within the past few months which has also led to the boost in oil revenues. There are high hopes that the situation remains relatively stable and oil production is relatively stable as this will boost revenue levels. 2) The Exchange Rate: Last year the Central Bank of Nigeria introduced far-reaching reforms to the foreign exchange market. Currently, the official exchange rate is N305/$ while the parallel market is N365/$. The performance of the foreign exchange market will be a key indicator to be monitored closely in 2018. 3) Inflation Rate: Nigeria has a double-digit inflation rate of 15.1% which in the past 6 months has been receding. Food inflation is still high above 20% and the Government’s has set a target of 12.4% through its 2018 Budget. This will be one economic indicator to watch out for. 4) GDP Growth Rate: Nigeria exited recession last year with a growth rate of 0.55% by Q2, 2017 and 1.40% by Q3, 2017. The country has been projected to grow at about 3.1% in 2018 (according to the World Bank). 5) Reserves Management: Nigeria’s current reserves stands at about $38.2bn, as it rose by $1.91bn in the first two weeks of December 2017. Reserve management is important to the nation to shield the nation from shocks in the economy. 6) Focus on MSMEs: There will be an increased focus on MSMEs lending and access to markets in 2018. Schemes such as the Lagos State Employment Trust Fund initiative has been implemented to address the challenge of rising interest rates. 7) Unemployment: Nigeria currently has the highest unemployment rate of 18.8% amongst the “MINT” (Mexico, Indonesia, Nigeria and Turkey) economies. Thisone indicator will be a critical focus in 2018. The ongoing Lagos State Employability Support Project and Lagos Innovates have been designed to combat the challenges of unemployment in Lagos State. 8) Foreign Direct Investments (FDI): Foreign Direct Investment (FDI) play a key role in the economy; particularly in job creation and stimulating economic activities. The capital importation into Nigeria in Q3 2017 recorded a substantial increase at about $117mn compared to the past few quarters, as the economy continued to recover from recession following its exit in Q2 2017. 9) Purchaser’s Managers Index (PMI): In 2017 Nigeria recorded steady improvement in its PMI, which closed at 55.9% signifying expansion in economic activities. In 2018 analysts, experts and policy will be keen to see how the PMI performs. 10) The 2018 National Budget: The timing of the passage and signing of the 2018 Nigerian Budget will ultimately dictate the pace of economic activities in the year. If the budget is signed off speedily, it will be a positive development, but anything that delays it into the second quarter will slow down the economy.
Recommendations for the Government in 2018
- Ensure timely releases of government reports such as the Budget Implementation report, NNPC annual reports and bulletins
- Ensure citizens’ participation in budget process- continuation of public hearing on the appropriation bill
- Uphold implementation of the Freedom of Information (FOI) act
- Organize regular training and retraining of public servants
- Improve reward system in the civil service to encourage better output
- Continued implementation of ease of doing business reforms across states in Nigeria
- Providing tax incentives to start-ups to encourage growth
References 1) National Bureau of Statistics (NBS) 2) NESG Macro-Economic Outlook Report 2018 3) Proshare.ng
