Nigeria’s government says its economy could still expand this year because of a bumper rice harvest, even as the International Monetary Fund forecast the first contraction in more than two decades.
Gross domestic product will probably expand by 0.35 percent from 2.8 percent in 2015, according to e-mailed documents from the Ministry of Budget and National Planning.
That contrasts with the IMF’s forecast on Tuesday that the economy will shrink by 1.7 percent, the first full-year contraction since 1991. “We expect a very good harvest of rice this year,” the Budget and National Planning Ministry’s spokesman James Akpandem said by phone from Nigeria’s capital, Abuja.
“That will reduce food imports and ease pressure on foreign exchange and inflation. This increased agricultural production and its benefits will help in boosting economic growth.” The budget office also sees expansion of 3.02 percent in 2017 even as the IMF cut its forecast to 0.6 percent from 1.1 percent previously.
Nigeria’s economy contracted in the first half of the year as government revenues fell following the halving of crude oil prices since 2014 and militant attacks on crude producing Niger River delta that cut output of its biggest foreign-exchange earner.
That coupled with shortages of foreign currency and electricity, as well as delayed passage of a record budget of 6.1 trillion naira ($19.3 billion) this year, weighed down economic activity.
A deal for rice-growing north western states of Kebbi and Zamfara to feed millers in Nigeria’s commercial hub of Lagos has helped boost output toward self sufficiency, Akpandem said.
Africa’s most populous nation spends about $22 billion annually on food imports, according to the agriculture ministry. Nigeria’s rice consumption is estimated at 5.25 million metric tons this year, of which 2.71 million tons will be produced locally and 2.2 million tons imported, according to the U.S. Agriculture Department.
The remainder will be filled from existing stock. “It’s too optimistic because that would mean they expect the third and fourth quarters to grow at more than 1 percent,” Ogoh Okiti, chief executive at Abuja-based Time Economics Ltd., said by phone. “We are producing more rice this year than before, but am not sure that it’s sufficient to drive growth significantly in a very short time.”
The budget ministry sent lawmakers spending proposals of 6.87 trillion naira for next year, 6.85 trillion naira for 2018 and 7.1 trillion naira in 2019, according to 2017-19 budget estimates. The projections assume the price of oil at $42.5 a barrel at an exchange rate of 290 naira per U.S. dollar in 2017. The ministry forecasts year-on-year inflation at 12.92 percent in 2017.
The ministry wants to avoid this year’s experience where approval of the budget was delayed by about four months as the executive and legislature haggled over allocations. “We expect the Senate to approve the medium-term expenditure plan this month, which will be used as basis to draft the 2017 budget,” Akpandem said. “We would like next year’s budget to be approved by December.”