SEATTLE — Between March and June 2016, the Nigerian economy experienced a rapid downturn in economic growth and production. According to a BBC article published in August 2016, between the months of April and June, the Nigerian economy contracted by 2.06 percent. As of today, crude petroleum accounts for 77 percent of Nigeria’s total exports. Crude oil reached a high of $112 per barrel in 2014. Conversely, in August 2016 the price of crude oil per barrel dropped to $50. This precipitous decline of petroleum prices pushed the Nigerian economy into a deep recession. However, Nigeria’s economy saw positive growth in 2017 for two consecutive quarters. Currently, Nigeria’s post-recession economy is seeking to generate future growth.
Poor Diversification Contributed to Nigerian Recession
A recent report by the International Monetary Fund, which lays out a plan to ensure future economic growth in Nigeria, suggests that Nigeria’s economy remains largely vulnerable, mainly due to the fact that Nigeria remains heavily dependent on oil exports and lacks diversification. According to the IMF report, “Reforms under the government’s Economic Recovery and Growth Plan have resulted in insignificant strides in strengthening the business environment and steps to improve governance.” Concern remains regarding Nigeria’s weak banking sector, creeping inflation and dependence on oil.
Nigeria’s recovery began largely due to a surge in the price of crude petroleum after a long slump. Foreign investment interest has increased in the wake of the Nigerian government relaxing exchange rates. Furthermore, interest rates remain relatively low, which also draws a large amount of interest from foreign investors. The U.S. foreign assistance program to Nigeria for FY 2019 is projected to provide $351 million in foreign assistance. Issues of health and poverty aid make up the largest portion of the budget. With continued foreign assistance and investment, Nigeria’s economy could see further economic growth and development.
Successes in Poverty Reduction Seen in Midst of Recession
As Nigeria continues to receive large amounts of foreign assistance, the economic recession created greater issues due to high unemployment and flat poverty levels. However, it is apparent that Nigeria has seen successful reductions in total poverty in comparison to previous decades. According to World Bank, 50.2 percent of Nigerian citizens live in slums. In 1990, the percentage of those living in slums was a towering 70 percent. In order to further reduce poverty levels across the country, Nigeria’s post-recession economy is seeking to generate future growth.
Efforts on the part of the Nigerian government to avoid a future recession look quite promising. Exchange and interest rates have been decreased, drawing increased foreign investment. Other reforms have sought to strengthen oil exports and diversify the Nigerian economy.
Nigeria’s Post-Recession Economy Looks to Build on Its Strengths
As the Nigerian economy has begun to expand after the recession, an all-time record of $130 million in outside capital has been generated by the service sector of the economy. Furthermore, nominal GDP growth in the manufacturing sector has totaled around 9.2 percent, which is 5.64 percent higher than growth in previous quarters. This is a notable achievement in the Nigerian government’s plan to diversify job growth in different sectors of the economy. In the fourth quarter of 2017, agricultural exports accounted for roughly 24 percent of the Nigerian economy. This is a large increase when compared to previous years where oil was the predominant export.
Although poverty continues to be an issue in Nigeria, there has been great progress in economic growth. Agriculture, manufacturing and the service sectors have seen positive changes in the wake of the recession. This has helped decrease unemployment and points to a brighter future for Nigeria. With continued foreign assistance and capital investment, Nigeria can undo the effects of the recession and address other prevalent issues. As of today, Nigeria’s post-recession economy is seeking to generate future growth, and the numbers look promising.
– Colby McCoy