Insurgency expected to slow GDP growth by 0.5 percent
July 1, 2014 | 5:23 pm| | | Start Conversation
Terrorist acts in Northern Nigeria will slow the country’s economy this year, knocking half a percentage point off growth like last year, Ngozi Okonjo-Iweala, the Minister of Finance, said on Tuesday.
Okonjo-Iweala that her 6.75 percent 2014 growth forecast took this into account.
“We are expecting about 6.75 (percent growth in 2014) and we have accounted for the impact of the insurgency which we will think will take half a percentage point off GDP growth,” she said in an interview during a visit to Berlin.
Ngozi Okonjo-Iweala told Reuters that while the violence in the northeast might put off some potential foreign investors, those who were in Nigeria for the long term seemed to be holding their nerve, as did portfolio investors in its government debt.
Nigeria overtook South Africa as the continent’s biggest economy this year, following a rebasing calculation that almost doubled its gross domestic product. The economy grew about 6.4 percent last year, the minister said, with the Islamist rebels having most economic impact on agriculture in the northeast.
The economist and former World Bank vice-president said her talks with German Finance Minister Wolfgang Schaeuble emphasised “our strong fundamentals despite the challenges that we face”.
She sought his support for the creation of a new Nigerian development bank to improve financing to small and medium-sized private enterprises which could become an “engine for growth” as the country seeks to diversify its economy away from oil.
Rebasing GDP had revealed hidden strength in sectors such as services and telecoms, which had “gone to 0.7 percent of GDP to 7 percent” and was seeing strong growth, said the minister.
She said the creation of a secondary mortgage market could help kick off growth in housing, another sector that she hoped could “help to make up for some of the lost growth”.
The minister cited government bonds yields of 4-5 percent as evidence financial investors were not panicking: “The prices are quite reasonable which is an objective assessment that investors may be looking at the long-term underlying fundamentals of the economy, which are strong.”
Some potential foreign direct investment might be affected negatively by the Islamist insurgency, she said, but existing investors – especially those from emerging powers such as South Africa, China and Brazil – were proving resilient.
“Part of our turbulence may also be linked to the upcoming election (in 2015),” she said. “Whenever we have elections there is always some increase in violence and disturbance.”
Boosting the regional economy is part of President Goodluck Jonathan’s response alongside counter-insurgency efforts and attempts at dialogue with Boko Haram, which was hampered by the fact that “they have not articulated any political demands”.
She was due to meet former British prime minister Gordon Brown in London on Wednesday to discuss a “safe schools initiative” aimed at avoiding a repeat of the still-unresolved kidnapping of more than 200 Nigerian schoolgirls by Boko Haram in April.
The hope is to raise $100 million for infrastructure such as solar-powered lighting, sanitary facilities, walls or alarm systems and to coordinate with local communities to make girl students especially “feel safer”, the minister said.
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