Nigerian and Angola economies suffer as oil prices fall


Nigeria and Angola, Africa’s oil producers, are facing economic difficulties mainly due to depressed prices of the liquid commodity on the international market.

Crude oil prices hovered between US $ 50 and US $ 55 a barrel between January and September this year.

Experts predict shrinking of the growth of the Nigerian economy to 0.4 percent while economic prospects for 2017 have been projected at 2.5 percent.

Spain’s FocusEconomics has indicated in its November 2016 economic outlook that Nigeria has slid into economic recession.

“Nigeria’s economy is in recession,” says the report. “The contraction of Gross Domestic Product (GDP) intensified in the second quarter, dragged by depressed oil prices, falling oil production, a lack of foreign currency, and fuel and power shortages.”

Economic slowdown in the second quarter of 2016 in Nigeria, being one of the major economies in Africa, has also negatively affected economic growth of the entire continent.

“Deceleration in the second quarter [of sub-Saharan Africa] was broadly due to Nigeria’s poor economic performance…” states the report.

It says Nigeria’s economy is set to contract for the first time in over two decades this year.

FocusEconomics’s panelists revised down the country’s growth prospects for 2016 for an eleventh consecutive month, this time by 0.5 percentage points.

Inflation edged up from 17.6 percent in August to 17.9 percent in September, marking the highest recording since October 2005.

This shows that the weakening Naira [Nigeria’s legal currency] has been heightening inflationary pressures in recent months.

In September, Nigeria’s central bank left the monetary policy rate at a record high of 14 percent in order to ease elevated inflationary pressures in a context of economic weakness.

The FocusEconomics panel expects inflation to average 15.9 percent in 2016, which is up 0.5 percentage points from last month’s projection.

Nigeria’s economic woos would be eased by the US $ 1 billion loan from the African Development Bank, likely to be approved in this month.

President Muhammadu Buhari, according to FocusEconomics, plans a record budget of US $ 22.6 billion for 2017.

However, this needs to be approved by lawmakers and is based on an oil price of US $ 42.5 per barrel.

In the case of Angola, the central bank raised the basic interest rate three times from the beginning of this year in order to curb the country’s spiraling inflation.

 “At its September 28 monetary policy meeting, the National Bank of Angola decided to keep the basic interest rate on hold at a record high of 16 percent,” says the FocusEconomics report.

The report says that Angola’s inflation has been “soaring due to the successive reduction in fuel subsidies and weakness of the Angolan Kwanza against the United States dollar…”

This has dramatically spiraled import-cost inflation for the oil producing country.

Angola’s central bank has indicated that monthly variation in consumer prices eased from 4.04 percent in July to 3.31 percent in August.

The report has predicted that Angola’s GDP will narrow to 1.2 percent in 2016.

Contraction of Angola’s economy comes at the back of depressed prices of oil, the country’s major export and foreign exchange earner.

 “As oil revenues constitute approximately 95 percent of exports and 66 percent of fiscal revenues, the country’s growth prospects will remain grim as long as oil prices stay subdued,” says the report.

Angola’s inflation rose from 39.4 percent in September from 38.2 percent in August.

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