Nigeria’s economy will continue to struggle to return to the robust levels of economic growth witnessed prior to the 2014 collapse in global oil prices due to the economic policies of the Buhari-led administration.
This is contained in a recent report release by Fitch Solutions on Nigeria’s country Risk for the third quarter of 2019, which predicted that it will take nine years for Nigeria’s economy to exit damages causes by policies of the President Muhammadu-led government.
According to the report, the contraction and slow projection in Nigeria’s growth will be driven by Nigeria’s challenging operating environment and back economic policies.
The report details some factors that will be responsible for the likely contracted and slow growth outlook for Nigeria’s economic outlook in the next 10 years.
However, it stated that the unfriendly business environment in Nigeria and the instability of the commodity-dependent economy will keep fixed investment below the levels required to move the country away from its oil dependence.
According to Fitch report, the victory of incumbent Muhammudu Buhari in the February 2019 elections suggests little scope for structural reform in the years ahead, weighing on the economy’s long-term growth prospects.
Hence, Nigeria’s economic growth forecast is put at 3.4% per year over the long-term outlook from 2019 to 2028, compared with 6.1% in the 2010-2014 oil boom years.
The report also shows that a combination of low prices and long-term constraints on production suggests that the oil sector will not be the economic driver that it was previously.
It stated that Nigeria’s economy will struggle to diversify away from its long-standing oil dependence, due to a poor operating environment hindering investment into alternative sectors.
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“Given the country’s growing population, the most pressing sectors for the Nigerian economy to diversify into would be those that create significant opportunities for employment, such as agriculture and manufacturing.”
While Nigeria’s large population should boost growth significantly, in the absence of sufficient employment opportunities there is a substantial risk that the country’s demographic dividend will turn into a demographic time bomb, with potential for the booming population to threaten political stability.
Meanwhile, it was noted that Nigeria’s large and fast-growing population (expected to reach 251.6 million by 2028) will ensure opportunities are on offer for investors willing to take on substantial risk.
On the issue of corruption, the report stated that with rampant corruption having concentrated wealth in the hands of political elites, the country suffers from significantly unequal wealth distribution and this makes policy implementation difficult.
“Nigeria’s business environment is significantly weakened by rampant corruption, burdensome bureaucratic procedures, and a weak legal framework. Financial crimes such as fraud, embezzlement and money-laundering also continue to threaten businesses operating in Nigeria.”
The latest inflation report shows that Nigeria’s inflation rose to 11.40% in May. According to Fitch, while Nigeria’s inflation moderated to an average of 12.2% in 2018, price pressures remain elevated – in part due to continued disruptions of the food supply chains because of instability in key producing areas.
Hence, it was revealed that average inflation will remain above the central bank’s target high of 9.0% until 2022. Thereafter, the inflation rate is expected to fall into high single-digit levels with slow growth in the economy.
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