Nigeria has had a sluggish economic growth of 2.8% since the end of 2015, according to the 2016 African Economic Outlook (AEO).
The African Economic Outlook is produced annually by the African Development Bank (AfDB), the OECD Development Centre and the United Nations Development Programme (UNDP). The 2016 African Economic Outlook (AEO) was launched by the Nigeria Country Office of the African Development Bank at an outreach event held last week at the Ahmadu Bello University in Zaria.
The Nigerian economy has been adversely affected by external shocks, in particular a fall in the global price of crude oil, said the report authors, Robert Asogwa, Barbara Barungi, Ojijo Odhiambo, and Alemu Zerihun.
The report says, “Growth slowed sharply from 6.2% in 2014 to an estimated 3.0% in 2015. Inflation increased from 7.8% to an estimated 9.0%. The sluggish growth is mainly attributed to a slowdown in economic activity which has been adversely impacted by the inadequate supply of foreign exchange and aggravated by the foreign exchange restrictions targeted at a list of 41 imports, some of which are inputs for manufacturing and agro-industry.”
This, the report says, has resulted in cuts in production and shedding of labour in some sectors. “However, with the increasing policy concern over the decline in growth, the central bank has moved to reduce the cost of borrowing for government and the private sector to stimulate the economy.”
The authors said the 2016 outlook is for slow economic recovery as some of the reforms begin to take effect and measures to boost the economy, such as increased spending on infrastructure, are implemented. “Some specific reforms pursued by the new administration to lay a foundation for renewed growth are commendable. The key reforms include the rationalisation of the public sector in order to cut the cost of governance; enforcement of the single treasury account to block financial leakages; renewed efforts at enforcement of tax compliance; preparation for zero-budgeting starting in 2016; and increasing the ratio of capital to recurrent expenditure to 30:70.”
Security, the report notes, remained a major challenge, in the northeast in particular. “While the military has stepped up the fight against the Boko Haram insurgency the humanitarian situation has continued to deteriorate. The number of internally displaced persons is estimated at over 2 million, located mainly in the cities where conditions are safer. Both the government and development partners continue to explore additional ways of improving the situation.”
The publication covers all 54 African nations, with individual country notes and corresponding statistical annexes. Nigeria’s case formed the basis for exchange of views on the AEO, as well as deliberations on prospects for the Nigerian economy.
At the time of the report launch, Barungi reported that the economy had contracted further by 0.36% in the first quarter of 2016, while inflation continued to rise, standing at 16.5%.
Policy reforms by the new administration are highlighted, and they include strong fiscal policy, improvements in public sector transparency and accountability, as well as adoption of a more flexible exchange rate.
The theme of the 2016 AEO is Sustainable Cities and Structural Transformation. The report looks closely at Africa’s distinctive pathways towards urbanisation, and how this is increasingly shifting economic resources to more productive activities.
Nigeria has been rapidly urbanising, with fast-growing cities such as Lagos and Kano facing increasing unemployment and income inequality due to poor urban planning and weak links between structural transformation and urbanization, say the report.
“Urbanisation is a megatrend that is transforming African societies profoundly. However, this is not accompanied by structural transformation, and therefore industrialisation remains rather slow. Two-thirds of the investments in urban infrastructure until 2050 are yet to be made,” the report adds.
If harnessed by adequate urban planning policies, urbanisation can help advance economic development through higher agricultural productivity, industrialisation, services and foreign direct investment in urban corridors, the authors said.
“Sustainable cities can only be driven by structural transformation if there is an integrated approach to urban planning. It is expected that the Federal Ministry of Power, Works and Housing will review the urban development policy and work with other line ministries to improve service delivery and chart a way forward for tapping into the opportunities provided by the growth of cities in Nigeria.
“Lagos is one of the seven mega-cities in Africa and has a high potential for innovation and job creation opportunities in sectors such as construction, information communications and technology (ICT) and retail trade,” the report says.
The July 29, 2016 event started off with a brief meeting with the university’s senior management, which expressed appreciation of the Bank’s efforts in reaching out to academia and encouraging scholars to engage in public policy space.
In his remarks, the Country Director of AfDB’s Nigeria Office, Ousmane Dore, emphasised the importance of the report. “It significantly informs policy dialogue and feeds into the design of Bank’s projects to support government priorities,” Dore said.
AfDB Lead Economist Barbara Barungi outlined the main findings of the report.
According to the publication, Africa’s economic performance had been steady and was expected to remain moderate in 2015 and strengthen in 2016 against the backdrop of a fragile global economy. The continent remained the second fastest-growing economic region after East Asia. The report predicts the continent’s average growth at 3.7% in 2016, increasing to 4.5% in 2017, provided the world economy strengthens and commodity prices gradually recover.