Sub-Saharan Africa has witnessed a sharp slowdown over the past two years and according to World Bank’s 16th edition of the Africa’s Pulse, a recovery is underway and Gross Domestic Product (GDP) growth in the region is expected to strengthen to 2.4 percent in 2017 from 1.3 percent in 2016, slightly below the pace previously projected.
Although the recovery is weak in several important dimensions, GDP growth has been stable in non-resource intensive countries—supported by domestic demand has remained stable. Weak recovery in the region’s largest economy has been associated with rising unemployment.
Rising unemployment and increased poverty rate has increasingly weighed down Nigeria, the international poverty line of US$1.9 PPP) is estimated to have risen by about 2 percentage points in 2016, and it is expected to rise before above that in the county before 2017 comes to an end.
As a huge exporter of oil, Nigeria’s current account surplus is expected to widen although as a share of GDP, the median current account deficit is projected to decline from 6.6 percent in 2016 to 6.4 percent in 2017, reflecting the increase in commodity prices. The deficit is expected to narrow the most among metals exporters and oil exporters, due to subdued imports and an uptick in trade.
As the central bank began implementing measures to improve access to foreign exchange, Nigeria saw a pickup in equity and portfolio inflows. Following the International bond and equity flows increase, sovereign bond issuance picked up, with Nigeria selling bonds on international capital markets.
Since July 2016, the Central Bank of Nigeria has kept its key policy rate at 14 percent as food price inflation continues to slow. However, the disinflationary impact from stabilizing domestic currencies is expected to push headline inflation down further.
Still battling with fluctuating currency, the spread between the parallel and official rates has persisted in Nigeria. According to the report, pressures on the exchange rate have eased due to higher oil prices, increased oil production, and a weaker dollar.
World Bank forecast a bright future for Nigeria, as overall growth is projected to pick up, from 1.0 percent in 2017 to 2.5 percent in 2018 and 2.8 percent in 2019. The forecast for 2019 was revised up by 0.3 percentage point, reflecting the expectations that oil production will remain robust and reforms in the foreign exchange market will help boost growth in the non- oil sector.