Is Nigeria’s economy recovering from policy shocks?

Nigeria's economy grew by 3.5 per cent in the fourth quarter of 2023 in real terms, with a yearly growth of 2.7 per cent despite facing challenges such as the removal of fuel subsidies and the free float of the currency. Chamberlain Peterside, CEO of Xcellon Capital Advisory, shared his insights on the current state of the economy in a recent interview with CNBC Africa. Peterside highlighted the pressures the economy faced in 2022 due to the redesign of the Naira and the scarcity of refined products, which impacted consumer sentiment and productivity. He noted that while the general elections in 2022 are behind us, the policies introduced, such as the removal of fuel subsidies and the liberalization of the forex rate, have created new challenges. Peterside expressed optimism about upcoming projects like refineries coming online, which could alleviate pressure on the forex market and stabilize currency rates, leading to increased productivity and foreign direct investment (FDI). However, he cautioned that these benefits may take time to materialize, and the economy may continue to face challenges in the coming quarters. In a deeper dive into the Q4 numbers, Peterside discussed the growth in the services sector, which expanded by 3.9% and accounted for 56.5% of the overall GDP. In contrast, the agriculture sector's contribution was modest at 2.1%, hindered by insecurity, infrastructure gaps, and logistical challenges. On a positive note, the oil sector showed signs of recovery after a period of decline, thanks to efforts to combat theft and leakage. Despite the growth in the services and industrial sectors, Peterside emphasized the need for targeted reforms to address credit issues, forex challenges, and rising food production costs affecting manufacturers. He stressed the importance of stabilizing the forex market, reducing inflation, and providing incentives to boost agro-processing and value-added manufacturing. Peterside underscored the urgency of addressing these issues to prevent further stagnation in the manufacturing sector. As Nigeria aims to diversify its economy and expand its export base beyond oil, Peterside highlighted the need for comprehensive solutions to tackle structural issues such as insecurity and unstable forex rates. He called for coordinated efforts from the government to implement impactful reforms and create a conducive environment for economic growth. While acknowledging the complexities of the current economic landscape, Peterside urged swift action to address immediate challenges and pave the way for long-term sustainability and resilience.