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Nigeria’s Slowing Recovery Points to Unchanged Interest Rate

Nigeria’s Slowing Recovery Points to Unchanged Interest Rate

Nigeria’s recovery from last year’s economic slump slowed in the third quarter, providing the central bank with another reason to leave interest rates unchanged next week.

Gross domestic product expanded 4% in the three months through September from a year earlier, compared with 5% in the second quarter, Statistician-General Simon Harry told reporters in Abuja, the capital, on Thursday.

Added to slowing inflation, Thursday’s data may convince the central bank to maintain its benchmark rate at 11.5% on Nov. 23. Policy makers have left the gauge unchanged for six consecutive meetings to build growth momentum in Africa’s largest economy.

The slower pace of recovery was driven by a fall in crude production by 6% in the third quarter to 1.57 million barrels per day, compared with a year earlier, resulting in a 10.7% contraction in the oil sector.

Nigeria’s Slowing Recovery Points to Unchanged Interest Rate

Africa’s top crude producer has been battling to ramp up production to reach its full OPEC+ quota due to ongoing supply disruptions.

Crude contributes just over 7% to Nigeria’s GDP and accounts for about 90% of foreign-exchange earnings and half of government revenue. 

The non-oil economy expanded by 5.4% from a year earlier, largely driven by the trade and telecommunication industries. That compares with 6.7% growth in the second quarter.

Nigeria’s government expects the economy to expand 2.5% this year, after contracting 1.92% last year. The Finance Ministry announced plans last month to increase spending and borrowing to help accelerate growth.

In a communique after its last MPC meeting in September, Governor Godwin Emefiele said the central bank’s medium-term goal is to fast-track growth rates above historical levels. Economic output has lagged the pace of population expansion of about 2.6% every year since oil prices fell in 2015, while inflation that peaked in March has exceeded the 9% ceiling of the bank’s target band for more than six years.

©2021 Bloomberg L.P.