Nigeria: Economy Grows in First Quarter on Oil Price Rise

Nigeria’s economy grew 0.5 percent in the first quarter, boosted by higher crude output and oil prices, according to the country’s statistics office, as activities gradually picked up after coronavirus lockdowns were gradually eased. 

Despite a full-year downturn in 2020, Africa’s largest economy emerged from its second recession since 2016. 

Before the coronavirus pandemic caused a recession and created wide financing gaps, including dollar shortages and inflation, Nigeria had been struggling with low growth.

“The Q1 2021 growth rate was slower than the 1.87% growth rate recorded in Q1 2020 but higher than 0.11% recorded in Q4 2020, indicative of a slow but continuous recovery,” The National Bureau of Statistics (NBS) said.

According to Reuters, Nigeria is immunizing its 200 million people, but last month the country’s regions were told to avoid administering first doses of AstraZeneca vaccines after half of their existing stock had been used, in order to ensure supply for a second dose. 

The non-oil market, which the government is attempting to make the main growth sector, increased 0.79 percent in the first quarter, according to the NBS. Growth was boosted in the quarter by telecommunications, crop production, real estate, food processing, and construction. 

Crude prices rose above $70 per barrel on Tuesday, but fell on Wednesday due to renewed demand concerns, including an increase in COVID-19 cases in Asia and expectations that rising inflation would prompt the US Federal Reserve to boost rates, limiting growth. 

Oil, which accounts for approximately two-thirds of Nigerian government revenue and 90% of foreign exchange, fell 2.21 percent in the first quarter as crude output increased to 1.72 million barrels per day from the previous quarter. 

Few expect Nigeria’s central bank to change interest rates next week due to the country’s weak growth. 

By keeping interest rates unchanged, the bank has taken an accommodative approach. Dollar shortages, on the other hand, have pushed inflation to a four-year high, while a shrinking labor market and rising insecurity have put pressure on households.

“While this points to the likelihood of firmer growth from the second quarter, it still does not allow for a more robust policy response to inflationary pressures,” Razia Khan, chief economist for Africa and the Middle East at Standard Chartered, said.

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