Nigeria rebounding but challenges remain for risk managers

Nigeria’s economy is exiting a painful recession, but challenges still remain that risk managers should be aware of, according to the International Monetary Fund (IMF). It has warned that policy implementation needs to move quickly and comprehensively to facilitate economic recovery and help the country reap its longer-term potential. In its latest economic health check of Sub Saharan Africa’s largest economy, it found growth in Nigeria recovered to 0.8% in 2017 after a historic collapse in oil prices – exacerbated by falling oil production and inadequate policies – took a major toll on the economy. The recent rise in oil prices is supporting the recovery, but more needs to be done to reduce unemployment and address poverty. According to the report, rising oil prices, new foreign exchange measures, attractive yields on government securities and a tighter monetary policy have made foreign exchange more readily available and helped contain inflation. Consequently, investors are returning to Nigeria. Economic growth in the fourth quarter of 2017 was positive for the third consecutive quarter, driven mainly by recovering oil production. The economy – excluding the oil and agricultural sectors – saw a first modest year-on-year expansion, after seven quarters of contraction. Policies initiated under the government’s Economic Recovery and Growth Plan have started to tackle some of the challenges facing the economy. They include the beginning of convergence in foreign exchange windows by reducing the number of existing exchange rates in the economy, a narrowing of the parallel market premium, some improvement in tax administration, anti-corruption efforts, and significant strides in improving the business environment. However, the IMF warned that, despite these positive developments, the economic situation remains challenging. Inflation, especially of food prices, remains high. Vulnerabilities in the banking sector are rising. Low tax revenues are keeping the fiscal deficit high, leading to more government borrowing that is crowding out private sector activity. Distortions in foreign exchange markets are slowing efforts to attract longer-term investment and diversify the economy. Nigeria is also faced with important social, economic, and political challenges. Factors weighing on the economy include a large infrastructure gap, high gender and income inequality, corruption, and the ongoing humanitarian crisis in the northeast. Nigeria needs to forcefully address these challenges so that it can provide enough jobs for its young people in the years ahead. The economy is growing at close to 3% annually, with youth (0-19 years of age) accounting for more than 54% of the population. Demographic trends imply that Nigeria could be the third most populous country in the world by 2050. This could present a significant challenge to per capita growth, requiring faster action to improve per capita incomes, reduce high unemployment and bring down poverty.

Nigeria rebounding but challenges remain for risk managers

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

European Parliament approves regulation to tackle forced labour

Absenteeism drops dramatically in France

Climate change could spread malaria risk to new countries, warns International SOS

Europe records 300% surge in farmer protests this year

Insurtech partners with USAID on climate adaptation programme

European Parliament approves regulation to tackle forced labour

Absenteeism drops dramatically in France

Climate change could spread malaria risk to new countries, warns International SOS

Europe records 300% surge in farmer protests this year

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

European Parliament approves regulation to tackle forced labour

Absenteeism drops dramatically in France

Climate change could spread malaria risk to new countries, warns International SOS

Europe records 300% surge in farmer protests this year

Related Articles