Oil is Nigeria's main source of foreign exchange earnings and government financing. As a result, growth expectations for the economy have deteriorated following recent drop in oil prices. The Nigerian Ministry of Finance projects growth this year of 5.5%, down from 6.4% at the start of 2014.
With a lot of uncertainty surrounding the economy, our economists have developed three economic scenarios to help public and private sector organisations prepare for an uncertain environment in 2015 and 2016. In these scenarios, we explore two types of shocks: an oil price shock and a political shock.
We expect that even under a benign economic scenario, the Nigerian economy will struggle to realise growth much higher than 4.0%. Nigeria's economy has tended to suffer following an oil price crash, although its resilience has improved in more recent times. Getting the policy response right matters as falling economic growth imposes a real 'human' cost on the population.
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