Nigeria Economy

The continued failure of commodity prices to recover significantly and the global slowdown of economic growth, especially in China and other emerging markets, made 2016 a tumultuous year for many African economies, indeed, “the worst year for average economic growth” in the region in over twenty years, according to a report from Ernst & Young. Compounding these trends, varying dynamics within the continent’s biggest economies meant that Nigeria slipped into recession while South Africa barely lurched forward with anemic 0.2 percent growth in the third quarter. Looking ahead, those countries which have diversified their economies, focused on energy infrastructure, and promoted industrialization will be best poised to overcome the current challenges and succeed in 2017.

As Aubrey Hruby and I documented in a report last year, those countries that rely heavily on the export of one or two resources to drive their economic growth have suffered as a result of the emerging market downturn and its knock-on effects, both in terms of demand for their commodities and in availability of financing for their major infrastructure and other development projects.

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The International Republican Institute’s (IRI) Nigeria Country Director Sentell Barnes likes to describe Nigeria as a house.

“When you see it from the outside, maybe it looks like it’s falling in. But when you see it from the inside, there are things in place where the country is preventing itself…from going off the edge,” said Barnes.

Barnes joined John Tomaszewski, Africa regional director for IRI and Robert Carpenter, an international polling consultant, at the Atlantic Council on July 14 for an event co-hosted by the Council’s Africa Center and IRI. Bronwyn Bruton, deputy director of the Africa Center, moderated the discussion.

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African economies currently face a double threat. First, commodity prices are at their lowest in decades, which has already caused a 16 percent drop in sub-Saharan Africa’s terms of trade (the ratio of export prices to import prices). Second, responding to its own slowing growth, China has scaled back its investment on the continent. As a result, African economies increasingly face budget shortfalls, weakening currencies, and constrained economic growth.

Particularly hard hit are those African economies, such as Nigeria, that are dependent on exporting commodities and importing—in the words of President Muhammadu Buhari—“everything including toothpicks.” Despite the pressure that Nigeria’s foreign earnings shortage has put on its currency, the naira, Buhari has obstinately refused to devalue it, ignoring calls from the International Monetary Fund (and many international observers) to do so. The bleak financial outlook has driven some Nigerian consumers to try to kick-start the economy through less orthodox measures, including a movement to encourage the consumption of locally produced goods. This movement, led by Nigerian Senator Ben Murray-Bruce, has spawned a popular Twitter hashtag #BuyNaijaToGrowTheNaira, as well as a catchy theme song.

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As oil prices fall to their lowest in decades, Nigeria's oil revenue has plummeted nearly $2 billion since the start of 2014. While Africa's most populous nation has continued to sell roughly 1 million barrels of crude oil per day, it has struggled to achieve a robust price. Brent crude—the benchmark against which Nigerian oil is priced—traded last week below $35 a barrel, the lowest price in more than a decade and considerably down from the $100 or higher that oil commanded between 2011 and 2014.

 

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Buhari says legislation that curbs US military aid is abetting Boko Haram insurgency

Nigerian President Muhammadu Buhari—at war with Boko Haram militants at home—in a July 22 address in Washington lashed out at US laws that ban the sale of weapons to foreign militaries accused of human rights violations saying such restrictions have only aided the insurgency.

“Unwittingly, and I dare say unintentionally, the application of the Leahy law amendment by the United States government has aided and abetted the Boko Haram terrorists,” Buhari said in an address at the United States Institute of Peace that was co-hosted by the Atlantic Council.

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