Country Economic Forecasts > Nigeria

The Nigerian economy struggled last year due to lower oil prices, which led to lower capital expenditure and tight forex liquidity conditions. Persistent electricity supply shortages also hit growth, while the delay in the appointment of a cabinet and the resultant policy vacuum complicated matters further. We estimate GDP growth at 3.2% in 2015. Despite the recent further fall in the oil price, growth is forecast to pick up to 3.8% this year and then rise further to average 4.8% a year in 2017-18.The past month has seen mounting pressure for an NGN devaluation. While President Buhari has supported the CBN's stance on the currency in the past, he recently acknowledged the adverse impact of tight forex liquidity conditions on the domestic business environment, prompting speculation that a devaluation may be imminent. And the parallel market rate plunged to a record low of NGN308 to the US$ last week. Our forecast shows an NGN adjustment only in Q2. The reason for this is twofold. First, the current rhetoric suggests that policymakers are still leaning towards using policy as a safeguard against higher inflation, which rose to 9.6% in December. Second, the monetary policy stance (lower interest rates and excess system liquidity) is not in line with a central bank planning to liberalise the foreign exchange market.