Nigeria hopes for oil upturn after economy shrinks again

LAGOS (Reuters) – Nigeria’s economy stayed in recession in the first quarter and shrank more sharply than thought at the end of last year, data showed on Tuesday, as signs of growth in the oil sector fuelled hopes of an upturn in coming months.

The economy shrank by 1.5 percent in 2016 for its first annual drop in 25 years, hit by a shortage of hard currency and lower revenues from its dominant oil sector as world crude prices stayed under pressure.

Gross domestic product shrank a further 0.52 percent year-on-year in the first quarter, the National Bureau of Statistics (NBS) said on Tuesday, also revising the fourth quarter contraction to 1.73 percent from 1.30 percent.

The central bank holds a monetary policy meeting on Tuesday and is expected to hold benchmark interest rates at 14 percent, analysts said prior to Tuesday’s GDP readings.

Average oil production inched up 0.07 million barrels per day (bpd) to 1.83 million barrels in the first quarter, the statistics office said.

Razia Khan, chief economist Africa at Standard Chartered Bank, said the state of pipeline repairs and a weak base of comparison suggested the oil sector should grow far more sharply from the second quarter.

“Although the (GDP) contraction was larger than expected, what matters is the outlook,” she said by email. “Things should get better.”

The NBS said the economy’s non-oil sector grew by 0.72 percent in the first quarter.

Supported by higher oil revenues, the central bank has in recent weeks succeeded in narrowing the spread in the naira currency’s official and parallel market rates.

It has sold more than $4 billion since it started intervening on the official foreign exchange market in February to try to ease pressure on the naira.

The currency has firmed on the black market from a record low of 520 to the dollar hit in February prior to the interventions.