NIGERIA’S growth rate will slow to about 5 percent next year as a drop in oil price and a depreciating currency put pressure on the economy of Africa’s biggest crude producer, according to the International Monetary Fund (IMF).
The drop in crude prices would exert pressure on Nigeria’s fiscal revenue and spending, with a depreciation of the local currency expected to boost inflation, the Washington-based lender said yesterday. The economy will expand 6.9 percent this year, according to the IMF’s most recent outlook published in October.
Nigerian policymakers devalued the naira last month and are proposing spending cuts for next year as the country heads towards elections in February.
The country’s fiscal and external “buffers” are low and need to be rebuilt, with the West African nation’s oil savings, the Excess Crude Account, depleted to $3 billion (R34.6bn) from $21 billion in 2008, the IMF said. Oil has dropped 45 percent since June.
Africa’s largest economy is drifting toward political violence that may result in disputed elections and authorities need to take action to stop it, Brussels-based International Crisis Group said last month. President Goodluck Jonathan’s ruling People’s Democratic Party (PDP) will face a united opposition led by former military dictator Muhammadu Buhari, the stiffest challenge since the PDP came to power in 1999.
“Capital outflows have continued and, with lower oil receipts, have led to sustained pressure on the naira,” said Gene Leon, the IMF’s Nigeria representative, said.
“Despite the outlook, Nigeria could surmount its challenges, especially if a national spirit of burden sharing and rebuilding together is actively embraced.”