Nigeria’s growth rate is expected to slow to about 5 percent in 2015 as falling oil prices cut revenues and spending, the International Monetary Fund said on Friday.
Africa’s biggest economy will have to rely more on businesses outside its core oil sector in the medium term — agriculture, trade, and services all helped it grow 6.1 percent in the third quarter of 2014, the fund added.
Nigeria has been battered by the more than 45 percent decline in crude prices since the summer, in the run up to hotly contested presidential elections in February.
“The authorities fully recognise the implications of this exogenous shock. They have already taken bold measures to counteract lower oil receipts, pressure on the naira, and a fall in reserves,” IMF mission leader to Nigeria, Gene Leon, said in the statement.
An 8 percent devaluation of the naira currency in late November would likely boost inflation, the fund added.
“But the effect is likely to be contained, in part owing to lower food prices from increased local production of staple food crops,” Leon said.
Leon said the country’s fiscal and external buffers had shrunk since the last sharp oil drop in 2008, leaving little room for manoeuvring.
“Compared to the onset of the 2008-09 financial crisis – the Excess Crude Account (ECA) in 2008 was $21 billion compared to $3 billion now, while gross international reserves was $52 billion,” he said.
As of Dec 17, gross foreign reserves were about $35.3 billion, according to central bank data. The ECA is a rainy day fund, which is meant to accumulate crude export revenues above the benchmark price.
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