Nigeria

The Economic Report on Africa 2002 shows that economic growth in Nigeria, which averaged below 3% per annum between 1996 and 1999, took an upward turn in 1999-2001 increasing from 2.8% in 1999 to 3.8% and 4.0% in 2000 and 2001, respectively. However, because Nigeria's population is growing at about 3% per annum, this improvement in GDP growth made little impact on the overall standard of living in the country.

The re-establishment of multiparty democracy in May 1999 under President Obasanjo, after 18 years of military rule, brought new optimism about the economy's performance and the possibilities for reducing poverty in the country. Though the Government has not been able to achieve the promised growth rate of 6-10%, the Report concludes that prospects are favourable. President Obasanjo's commitment to maintaining political stability and improving governance in this resource-rich economy could lift Nigeria to a higher growth path.

The Nigerian economy is subject to certain inherent vulnerabilities, both economic and political. Economically, these include the dependence on oil in the face of highly volatile oil prices, and the strong political demand for fiscal expansion and monetization of oil revenue surpluses. Due to the inherent difficulty of handling oil surpluses and managing the exchange rate effectively, inflation more than doubled to 15.6% in 2001 from about 7% in 2000. The overall balance of payments surplus declined from 7.0% of GDP in 2000 to 3.6% in 2001. Politically, the inherent problems are linked to the sometimes violent, ethnic and religious conflicts.

The Report projects that the growth performance of the Nigerian economy could decline in 2002, due mainly to the delayed effect of oil price declines in 2001. There is also the risk of inflation and nominal exchange rate depreciation that might arise from expansion in government expenditures as the country prepares for elections in 2003. Recent oil price increases and expansion in offshore production could, however, help the economy improve or maintain its performance.

Nigeria has abundant growth reserves and is one of sub-Saharan Africa's leading economies, although behind that of South Africa. To ensure sustainable growth and development of the economy in the coming years, the Federal Government should continue to address the fundamentals underlying fiscal operations, notably, the federal revenue-sharing formula smoothens national consumption and strengthens the country's public sector resource management.