Economic activity has been severely hit by the decline in oil prices and the troubles disrupting oil production. Real GDP contracted by 1.5% in 2016, and the recession continued in first-quarter 2017. Stimulated by higher crude oil prices and an increase in oil production, the return to growth will nonetheless be sluggish. Restrictions on external liquidity continue to hamper industrial activity and weaken the exchange rate. President Buhari’s health problems, the risk of terrorist attacks, and the sabotage of oil facilities are all threats to economic activity.
Political troubles
President Muhammadu Buhari has severe health problems and must travel frequently to England for treatment. This situation raises doubts about President Buhari’s capacity to govern and could trigger a change of leadership before the next elections, scheduled for February 2019. According to the constitution, if the president fails to complete his term in office, he would be replaced by the vicepresident, Yemi Osinbajo. This situation already occurred in 2010. The transition risks becoming a source of conflict as power would be shifted from President Buhari, a Muslim from the north, to Mr. Osinbajo, a Catholic from the south, whereas tensions are rife between the two communities.
The government has launched the Economic Recovery and Growth Plan, an ambitious reform programme through 2020. It aims to diversify an economy that is still heavily dependent on oil, which accounts for about 10% of GDP, 40% of state revenues, and 80% of exports. The plan also aims to strengthen the role of the private sector and is targeting GDP growth of 7% by 2020. These targets seem very optimistic. The government is unlikely to carry out liberal reforms or to lift capital controls, trade restrictions or energy price regulations. To date, the most important progress has been made towards oil sector reform, which aims to split up the national oil company (Nigerian National Petroleum Corporation) into three distinct entities, to provide more control over them and to combat corruption.
To read the entire report Please click on the pdf File Below: