IS NIGERIA READY FOR REVIVAL? greater diversification,” says Peter Amangbo, chief executive of Zenith Bank, the country’ s largest lender.
Oil attacks
For now, however, Nigeria’ s most invidious problem – that of a dollar liquidity shortage – must be corrected. Collapsing crude oil prices were the proximate cause of this deficiency. But the initial challenge has been exacerbated by the country’ s declining crude oil production as a result of rising militant activity in the Niger Delta. By early 2016, attacks on oil facilities had become so severe that Nigeria lost its status as Africa’ s biggest oil producer to Angola. In doing so, it lost a crucial source of US dollar revenue.“ During the [ former president ] Goodluck Jonathan era, the main problem facing Nigeria’ s oil sector was the issue of bunkering [ theft from pipelines ]. Today, it is militants’ attacks on oil facilities in the Niger Delta that is shutting in production,” says Yvonne Mhango, director and sub-Saharan Africa economist at Renaissance Capital.“ Even if oil prices rebounded, it won’ t have a material effect on the country because production levels are so depressed.”
The impact has been challenging as government revenues and exports have both taken a hit, diminishing public investment and cutting off much needed supplies of hard currency. There have also been knock-on effects for the non-oil economy.
Broad-based recession
In the second quarter of 2016, the national statistics agency revealed that Nigeria had entered into a recession, which appeared to be relatively broad-based across both hydrocarbon and non-hydrocarbon sectors.
“ The slowdown in non-oil growth is related to the lack of dollar liquidity. Though the nonoil economy accounts for 90 % of GDP, it relies on the hard currency generated by the oil sector to secure imports,” says Oyin Anubi, sub-Saharan Africa economist at Bank of America Merrill Lynch.
Collectively, in June 2016 these challenges led the CBN to abandon its administrative dollar peg, which had been in place since February 2015. While this policy helped to stabilise the currency and ward off inflationary pressures that would have affected ordinary Nigerians during the period, it also earned the criticism of investors and other market participants due to the various restrictions put in place to achieve
2016 | Business Times Africa 49