After Africa’s largest economy suffered a recession in 2016—its first in over two decades, the government came up with an answer. Or at least it thought it did.
Based on hopes of aggressive growth, the Nigerian government launched its “Economic Recovery and Growth Plan” (ERGP) in March 2017 with a string of bold projections to turn the slump around. But latest data from Nigeria’s statistics bureau (NBS) shows the plan is well off-course.
While the ERGP projected strong GDP growth rate of 4.5% in 2019, a report released this week by NBS shows the economy grew by 2.01% in the first quarter of the year—a slowdown in growth from the previous quarter.
Unless the economy picks up significantly in the next three quarters, the ERGP projection is well off its mark. The African Development Bank thinks so as well as it predicts Nigeria’s economy will grow by only 2.3% this year. Meanwhile, risk analysis firm Verisk Maplecroft estimates economic growth will average 2.7% over the next four years. If those estimates prove right, 2019 will be the third straight year in which economic growth falls short of the ERGP’s projection.
The ERGP’s bold forecasts are not limited to economic growth as it had also projected Nigeria’s unemployment rate will drop to 12.9% this year. That’s a tall order given, as of the third quarter of 2018, the unemployment rate was nearly double of that figure. And on recent evidence, there’s little chance of a downward slide as the unemployment rate has climbed for 13 consecutive quarters.
The lack of jobs is a major problem in Africa’s most populous nation given its ballooning population it is also tied to concerns about rising insecurity across the country. Oil production levels—Nigeria’s big ticket cash cow—are also currently lower than the ERGP’s bold projections.
“The feedback we heard in Lagos is that this beautifully designed plan was not being implemented effectively,” says Charles Robertson of global head of research at Renaissance Capital. “Nigeria would be one of the best reform stories of emerging markets if only they could actual implement this plan.” Robertson believes 4.5% growth was not an unrealistic target for an economy with a 3% annual growth rate in population but that Nigeria has been unable to deliver on relatively modest ambitions.
“We expect the oil sector’s growth to be restored in the second quarter, in part due to new production from the Egina oilfield,” says Renaissance Capital analyst Yvonne Mhango in a note. “That plus a pick-up in agricultural and government activity sustain the non-oil sector’s growth at around 2.5%.” Overall Renaissance forecasts Nigeria’s growth at 2.5% for 2019.
With the ERGP projected to cover a four-year span until 2020, Africa’s largest economy is running out of time to regain steam. The problem is very few expect economic policy to change soon under president Muhammadu Buhari who has secured a second four-year term in office.
The expectation is the former military ruler, who has a reputation for inflexibility on economic policy, is unlikely to do things much differently during his second term. And those sentiments are already proving accurate as Buhari has moved to retain the governor of Nigeria’s central bank whose monetary policies have largely mirrored rhetoric from the presidency over the past four years.
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