While Nigeria existed a 13 month recession on the back of improved oil production, potential attacks by militants in the Niger Delta region could jeopardize future oil recovery.
BMI Research in a recent report said that though accelerating output in the hydrocarbons sector facilitated an uptick in headline growth in the second quarter (Q2), future production is threatened by the potential return to arms of the Niger Delta Avengers, a group that carried out a number of attacks on key pipelines in 2016.
Nigeria’s crude and condensate dropped by almost 50 percent to 1.1 million barrel as at the end of 2016, further exacerbating the already anaemic position of a country struggling with a severe foreign exchange scarcity.
As a result of the aforementioned challenges, the country sipped into its first recession in 25 years when GDP contracted by 1.60 percent, according to the National Bureau of Statistics (NBS).
However, the country existed a recession with a positive growth of 0.55 percent in the second quarter, thanks to the relative calm in the Niger Delta region that helped lift oil production and the introduction of a Investors’ and Exporters’ window (I &E) that resulted in increased dollar supply.
The report showed that oil GDP hit 1.64 per cent in second quarter of 2017, up from -11.63 per cent in second quarter of 2016 and -15.40 per cent in the first quarter of 2017 while the non-oil GDP grew at 0.45 per cent, up by 0.83 per cent points from the record of the first quarter of 2016.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Andrew Yakubu revealed recently that a significant milestone has been recorded in the oil industry as the country’s crude oil production has increased to 2.7 million barrels a day (mpbd), from 2.4 million (mpbd).
Nigeria’s GDP annul growth of 0.55 percent lag behind countries like Rwanda, Kenya, South Africa, Ghana, and Botswana with a GDP growth rate of 4 percent, 5 percent, 2.50 percent, 9 percent, and 1.90 percent.
While improved rains and an uptick in commodities have supported growth across sub-Saharan Africa, structural headwinds will prevent more robust recovery.
For instance, Kenya’s GDP growth is projected to decelerate to 5.5%, a 0.5 percentage point mark down from the 2016 forecast, according to the World Bank’s Kenya Economic Update (KEU) released in Nairobi.
The East African country has been grappling with severe drought that resulted in hike in the price of food as it faces a marked slowdown in credit growth to the private sector.
The World Bank on Tuesday halved its 2017 growth forecast for South Africa after the economy fell into recession earlier this year.
It said in a report that 2017 growth would probably be 0.6 percent, down from an earlier estimate of 1.1 percent. Growth is seen ticking up to 1.1 percent next year and reaching 1.7 percent in 2019.
But the bank warned any prospect of recovery would “remain fragile” unless South Africa succeeds in becoming more productive.
“Improving rains across the region have supported robust growth in the agricultural sector for a number of countries. Commodity prices have continued to recover from 2016 lows, narrowing the region’s fiscal and current account deficits, stabilising local currencies and reining in inflation. Structural headwinds will prevent a more robust recovery in key markets, re-affirming our outlook for a slow but steady recovery in headline growth across SSA,” said BMI Research.