OPEC Foresees Brighter Days Ahead for Nigeria’s Economy Despite Hurdles

The Organisation of the Petroleum Exporting Countries (OPEC) has stated that Nigeria’s economy, despite facing hurdles in the first half of the year, shows signs of potential recovery in the coming months.

The recovery is expected to be anchored by Nigeria’s Purchasing Manager Index (PMI) for April, which experienced a robust rebound, reaching 53.8 compared to a mere 42.3 in March.

“While Nigeria’s economy encountered difficulties in gaining momentum in 1H23, the April Stanbic IBTC Bank Nigeria PMI showed a significant recovery, indicating a potential near-term turnaround,” the report highlighted.

The OPEC report shed light on some of the challenges faced by Nigeria’s economy in May, including low business activities, diminished purchasing power among consumers, high input-cost inflation, and lower employment levels compared to the previous year.

One key concern highlighted in the report was the country’s inflation data for March, revealing a persistent acceleration with an annual rate of 22 percent year-on-year, up from 21.9 percent in February and 21.8 percent in January. The rise was attributed, in part, to food inflation, which soared to approximately 25 percent year-on-year in March.

The Central Bank of Nigeria’s decision to keep the policy rate unchanged at 18 percent, following rate hikes of 50 basis points in March and 100 basis points in January, was also mentioned in the report.

Despite these challenges, Nigeria’s PMI showed a strong recovery, reaching 53.8 compared to 42.3 in March, offering hope for a potential turnaround in the near future.

The recent removal of fuel subsidies in Nigeria has added to the complexity of the economic landscape. President Bola Tinubu’s announcement to end the petrol subsidy regime resulted in an immediate surge in petrol prices, skyrocketing from an average of N179 to N200 per litre to well above N500 per litre.