Nigerian Economic Growth at 4-Year High on Oil and Credit Boost

LAGOS (Capital Markets in Africa) – Nigeria’s economy expanded the most in four years in 2019 as oil output increased and the central bank took steps to boost credit growth.

Gross domestic product expanded 2.27% last year, the most since 2015, the Abuja-based National Bureau of Statistics said on its website on Monday. The economy grew 2.55% in the three months through December from a year earlier, compared with 2.3% in the third quarter. The median estimate of four economists in a Bloomberg survey was for a quarterly number of 2.21%.

West Africa’s largest economy has been struggling to recover meaningfully from a 2016 contraction and last year the central bank started stepping in to boost output. Hamstrung by high inflation the monetary policy committee reduced its key lending rate only once in 2019, but the institution announced increases in the loan-to-deposit ratios for banks to force lenders to give out more credit.

Real growth in the finance and insurance industry was 20.18% in the fourth quarter, driven by a surge of 22.33% in financial institutions, the most in at least four years. The finance and insurance sector’s contribution to real GDP rose to 3.19% in the three months through December from 2.72% a year earlier.

The central bank said last month’s private-sector credit growth accelerated to 13.6% in December. While the biggest take-up of credit in the last seven months of 2019 was in manufacturing, the sector grew only 0.77% for the year, dragged down by a slump in oil refining.

Lowered Forecast
While President Muhammadu Buhari has pledged to diversify his country’s economy, the fortunes of Africa’s biggest oil producer are still closely linked to its crude output. It accounts for less than 10% of GDP but is the biggest source of foreign revenue for the nation. Production rose to 2 million barrels a day in the fourth quarter from 1.91 million barrels in the same period a year earlier.

The International Monetary Fund lowered its forecast for Nigeria’s 2020 growth forecast to 2% from 2.5% last week “to reflect the impact of lower international oil prices”, and recommended a major policy overhaul to reduce vulnerabilities, including widening debt profile and budget deficits that jeopardize the economy.

Uncertainties surrounding the coronavirus outbreak that started in China, the world’s leading oil importer, have driven global oil demand lower and pushed prices below the $57-a-barrel the Nigerian government forecast in its 2020 budget.