Nigerian Growth Slows to 2.1% as Oil, Manufacturing Suffer

  • Economy expanded 2.8% in 2015, the slowest place since 1999
  • Non-oil industry grew 3.1%, little changed from third quarter

Growth in Nigeria, Africa’s biggest economy and oil exporter, slowed in the fourth quarter as crude revenue fell and manufacturers struggled amid a shortage of foreign-exchange for imports.

Gross domestic product expanded 2.1 percent from a year earlier, compared with 2.8 percent in the third quarter, the National Bureau of Statistics said in a report on Tuesday. The median of 11 economist estimates compiled by Bloomberg was for growth of 2.85 percent.

“These are very poor figures, and worse than expected,” analysts at Lagos-based FBNQuest, including Gregory Kronsten, said in a e-mailed research note on Wednesday. They had predicted fourth-quarter growth of 3.9 percent. “The poor data are the consequence of the exposure of Nigeria’s Achilles heel. The slump in the oil price has eroded government revenues and dramatically reduced the supplies of foreign exchange for an import hungry economy.”

The economy expanded 2.8 percent in 2015, according to the statistics office, the slowest pace since 1999.

Tumbling oil prices have battered Nigeria, which used to rely on crude for two-thirds of government revenue. The economy will grow 3.2 percent this year and 4.9 percent in 2017 as long as the government boosts investment in infrastructure, according to the International Monetary Fund. The Washington-based lender wants Nigeria to diversify its income sources, get more companies and individuals to pay taxes and pass new legislation to encourage investment in the oil sector.

Oil production fell to 2.16 million barrels a day from 2.17 million barrels in the third quarter. The industry contracted 8.28 percent in the three months through December compared with expansion of 1.1 percent in the previous quarter, the statistics office said. Growth in the non-oil industry, which accounts for 90 percent of GDP, was little changed at 3.1 percent. The industrial sector contracted 3 percent, extending its recession.

The central bank introduced capital controls and limited currency-trading in a bid to bolster the naira, effectively pegging the currency at 197 to 199 against the dollar since March last year. The naira is trading at about 315 per dollar on the black market.

The restrictions exacerbated the economic slowdown by deterring foreign investment and preventing local businesses from paying international suppliers, according to London-based Capital Economics Ltd.

“The government’s own policy response has actually worsened the situation,” John Ashbourne, an economist at Capital Economics, said in an e-mailed note on Tuesday. “Growing strains in the balance of payments are increasing the risk of a disorderly devaluation. A sudden shock could push the economy into an acute crisis.”

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