Nigeria’s economy contracted again in the first quarter, data showed on Tuesday, but the Central Bank of Nigeria, CBN, expects Africa’s biggest economy to return to growth by the end of the third quarter thanks to higher foreign exchange inflows.
Africa’s biggest economy shrank by 1.5 percent in 2016 for its first annual recession in 25 years, hit by a shortage of hard currency and lower revenues from its dominant oil sector as world crude prices remained under pressure.
Gross domestic product shrank a further 0.52 percent year-on-year in the first quarter, the National Bureau of Statistics (NBS) said on Tuesday, but less than the revised contraction of 1.73 percent in the fourth quarter.
Hours after the figures were published, CBN Governor, Godwin Emefiele said the monetary policy committee voted to keep the benchmark interest rate at 14 percent, saying it was too early for a cut due to the inflation rate being above its target.
Analysts polled by Reuters had expected no change in the rate.
Lukman Otunuga, a research analyst for FXTM, said the central bank made a “logical decision” to keep rates on hold while the nation sought economic stability.
“The damage of depreciating oil prices still lingers on with social economic issues, soft domestic data and inflation exposing the nation to downside risks,” he said.
Emefiele said the recession would be over by the end of the third quarter. “We have seen various positive signs of the economy,” he said.
Adding to the optimism, a spokesman for the presidency also said Nigeria would leave recession late this year.
Emefiele also said the bank was pushing to end the spread between the black market and official foreign exchange rates, pointing to a rally in the naira after a new trading window launched a month ago attracted foreign inflows worth $1.1 billion.
Nigeria created the window to attract more investors confused over its system of at least five foreign exchange rates.
“I am so optimistic that we will get to the end of this struggle,” Emefiele said, refusing to give an exchange rate target.
Signs of growth in the oil sector, as laid out in the NBS data, fuelled hopes of an upturn in the coming months.
Average oil production inched up from the fourth quarter of 2016 by 0.07 million barrels per day (bpd) to 1.83 million barrels in the first quarter, the statistics office said.
Militants attacks on energy facilities in the southern Niger Delta region last year cut crude output by as much as a third in 2016, but there have been no major attacks in 2017 amid talks with the government aimed at reaching a peace agreement.
The NBS said the economy’s non-oil sector grew by 0.72 percent in the first quarter in real terms, which was 1.05 percent higher than the fourth quarter of 2016, Reuters reports.
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