Nigeria likely to lower estimate for 2015 GDP after naira drops

LAGOS (Reuters) – Nigeria expects to lower its forecast for 2015 economic growth again, after cutting its forecast to 5.54 percent in January, after oil prices fell and the currency weakened further last month, the country’s statistics bureau said.

Yemi Kale told the Reuters Africa Investment Summit on Tuesday he did not expect a reduction of more than 1 percent in the 5.54 percent forecast. Final figures will be released by half-year, he said.

Nigeria lowered its forecast for economic growth in January from 2014’s 6.22 percent after the government cut spending because the price of oil had slumped.

“Because of the changes in the macro-variables … we are not sticking with those forecasts any longer. The exchange rate, crude oil forecast have changed,” Kale, the head of the National Bureau of Statistics, told Reuters by telephone.

“I’m assuming the growth rate may drop further,” to around 4 percent,” Kale said, “but again other sectors may compensate for the drop in oil prices and the depreciation.

“Nigeria’s currency suffered its biggest monthly decline in more than five years last month, amid concern over political uncertainty and the central bank’s ability to manage the currency as oil prices fell.

The naira fell through a psychologically important level of 200 to the dollar in February, prompting the central bank to scrap its bi-weekly forex auctions, in a de facto devaluation.Kale expects inflation in Africa’s biggest economy to inch up to around 9 percent, the upper end of the central bank’s target, from its January forecast of 8.78 for 2015.

More than half of Nigeria’s population of 160 million live in villages and imports account for only 13 percent of total domestic consumption, Kale said, so the effect of imported inflation has been limited following the devaluation.

Reforms to the non-oil sector and investments in power and infrastructure should help cushion the loss of revenues from weak oil prices, he said.

“The price of commodity (oil) has gone down, but the exchange rate weakness has cancelled the impact on the inflation,” he said.

Kale said data on imported capital for the past two years showed a significant amount of foreign capital flowed into the country. But it flowed out as oil prices started to plunge last year, exerting pressure on the currency.

The stock exchange said last month foreign investors sold shares valued at 846.5 billion naira ($4.5 billion) in 2014 as oil dropped and the currency weakened.