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Published On: Tue, Feb 28th, 2017

Nigeria’s Economy Shrinks Year-onYear Due to Depressed Oil Prices

(Bloomberg) Nigeria’s economy shrank for a fourth consecutive quarter in the three months through December and contracted for the whole year, the first such move since 1991.
Gross domestic product in Africa’s most-populous country declined 1.3 percent in the quarter from a year earlier, after shrinking 2.2 percent in the previous three months, the National Bureau of Statistics said in an e-mailed statement Tuesday. The median of 10 economist estimates compiled by Bloomberg was for the economy to shrink by 1.4 percent. GDP contracted 1.5 percent for all of 2016. It was the first full-year drop in 25 years, according to International Monetary Fund data.
Lower prices and output of oil, Nigeria’s biggest export, cut government revenue by about half and reduced the foreign currency available to import refined fuel and factory inputs. A weakening naira contributed to inflation accelerating to the highest level in more than a decade, prompting the central bank to increase its key lending rate to a record 14 percent. Nigeria’s economic woes were further exacerbated by a five-month delay in approving spending plans for 2016 needed to stimulate business activity.
“GDP was hit by a declining oil sector and a tight foreign-exchange situation,” Pabina Yinkere, the Lagos-based head of research at Vetiva Capital Management Ltd., said by phone.
The government said improving crude prices, and the restoration of stability in the Niger River delta — where militants blew up pipelines, cutting crude production to almost three-decade lows in 2016 — will help the economy rebound this year. The IMF forecasts the economy will grow by 0.8 percent in 2017.
Fourth-quarter GDP increased 4.1 percent from the preceding three months, the statistics agency said.
Output by the oil sector in 2016 contracted 14 percent from a year earlier, and shrank 12 percent in the fourth quarter from the same period in 2015, the agency said. Oil production averaged 1.9 million barrels a day in the fourth quarter compared with 1.6 million barrels a day in the third.
The non-oil sector contracted by 0.3 percent in the three months through December, and by 0.2 percent in 2016. A decline in real estate, manufacturing, construction and trade weighed most on the non-oil sector, according to the agency.

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