Nigeria's economic recovery

Nigeria’s economy has turned a corner

The oil price shock which started in mid-2014 severely affected the Nigerian economy. In 2015, the economy slowed sharply as annual real GDP growth declined to 2.7%y/y from 6.2%y/y in 2014. By 2016, the economy recorded its first recession since 1991, recording a growth of -1.5%y/y as oil production shortages exacerbated the decline in the oil price. Notably, the underperformance in the oil sector spilled over to the non-oil sector through the exchange rate channel, with the non-oil sector contracting 0.2%y/y to record its worst performance since 1985

By Q2’17, the Nigerian economy exited recession recording a positive growth rate of 0.5%y/y. The recovery was in part due to a sharp recovery in the oil sector, driven by an improvement in oil prices and production volumes. In addition, the non-oil sector recorded a positive growth for the second consecutive quarter, spurred by ongoing recovery in the manufacturing sector due to improved foreign exchange (FX) liquidity. Asides the improvement in real GDP, the performance across several other macro-indicators suggest that the economy is on track for a broad-based recovery. 

Nigeria's economic growth prospects – three scenarios

We have developed three scenarios that show Nigeria's potential economic performance over the next 5 years. In these scenarios, we examine the impact of political shocks, and the implementation of structural reforms and economic diversification on key economic indicators in Nigeria. In our analysis, we assume that oil continues to be the main driver of fiscal and export revenues over the forecast period. As such, the extent to which the Nigerian economy moves towards its near-term development aspirations is dependent upon the success of its import substitution policies.

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Kenneth Erikume

Kenneth Erikume

Partner, PwC Nigeria

Tel: +234 (1) 271 1700

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