Nigeria’s economy, banking industry with bright outlook in 2017

As economies across the world continue to strategize on how to enhance their policies and strengthen their financial institutions, Nigeria fiscal and monetary authorities are also not left out. They remain optimistic that the largest economy in Africa would have a better economic year in 2017.

2016 was regarded by many as a tough calendar year, for not only the banking sector but the Nigerian economy as a whole.

In fact, the sharp lower oil prices have unfavourable effects on the growth of the banking sector, as the sector recorded high Non-Performing Loans (NPLs) in 2016, with some banks violating the Central Bank of Nigeria (CBN) average NPL requirement of five percent in December 2015 to above 11 percent as at third quarter (Q3) of 2016.

Analysts at both Standard Chartered Bank and Moody’s have predicted a bright economic outlook for 2017 as they predicted that Nigeria’s economy would recover from its current recession and record growth in 2017, despite the challenges posed by weaker oil earnings and foreign exchange.

The two experts, Managing Director and Chief Economist, Global Research, Africa, Standard Chartered Bank, Razia Khan, and senior analytical adviser at Moody’s, Aurelien Mali, noted so in an advisory note and in an interview with Reuters respectively. While Khan predicted a 2.8 percent growth, Mali predicted 2.5 percent expansion provided the country can achieve 2.2 million barrels per day production.

Nigeria, Africa’s largest economy, is in its worst economic crisis in 25 years, which was caused by low oil prices that have eroded both government reserves and spending, and the shortage of foreign exchange in the system.

According to Khan, “Growth in the non-oil sector, which accounts for 92 percent of Gross Domestic Product (GDP), was finally positive (but only just, with ‘growth’ of 0.03 percent year on year (y/y), following two consecutive y/y contractions in first quarter (Q1) and second quarter (Q2).

On his part, Mali explained that “With the resumption of oil production and the dollars that should come, we expect that Nigeria would be able to accelerate the implementation and acceleration of the budget, we expect that (growth) could reach 2.5 percent in 2017.” he said.

Also, the President of the Chartered Institute of Bankers of Nigeria (CIBN), Professor Segun Ajibola, said that the federal government must show a strong commitment to the diversification of the Nigerian economy from oil, in order to leapfrog from the current economic crisis in 2017 and beyond.

According to him, there is the need for government at all levels to review other countries’ experience who had been in a similar situation and learn from their them.

Meanwhile, the Federal Government of Nigeria’s (FGN) 2017 Budget proposal was presented to the joint sitting of the National Assembly on December 14, 2016, by President Muhammadu Buhari, tagged “the Budget of Recovery and Growth.”

In his speech, the president said that the Federal Government’s priorities in 2017 will be a continuation of the 2016 plans but adjusted to reflect new additions made in the Economic Recovery and Growth Plan.

“The Full Year 2017 budget will continue the diversification of the economy from reliance on oil on one hand and also serve to pull the country out of recession. The FGN is estimated to spend N7.298 trillion as against projected revenue of N4.94 trillion with the deficit of N2.36 trillion to be financed through external and internal borrowings.”

Therefore, in order to restore growth, a key objective of the Federal Government will be to bring about stability and greater coherence between monetary, fiscal and trade policies while guaranteeing security for all.