Tuesday, November 22, 2016

Nigeria's Slump

Two years ago, in 2014, Nigeria overtook South Africa to become the continent's largest economy, measured by GDP. Yet the country faces severe infrastructure challenges, and it still suffers from chronic power shortages.

Nigeria has seen its crisis deepen in the third quarter. Renewed attacks on pipelines and a slump in oil prices sent the West African nation into its third quarterly contraction in a row, with no fix in sight.

Oil production accounts for around 70 percent of government revenue, and the bulk of the nation's export earnings. Oil production averaged 1.63 million barrels per day. That marked a 22-percent drop from the same period a year earlier, when Nigeria produced 2.17 million barrels per day.

The government's efforts to prop up the naira has drained foreign currency reserves, necessitating the abandonment of the naira-dollar currency peg in June of this year. Despite that measure, a dollar shortage still persists, with black market rates hovering around 440 naira to the greenback this month, compared with the official bank rate of 320 naira to the dollar.

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