Nigeria's Economy Slows as Oil Production Falls and Reforms Take Effect

ABUJA (Reuters) - Nigeria's annual economic growth rate slowed to 2.51% in the second quarter, data showed on Friday, hurt by a fall in oil production amid a series of reforms by new president Bola Tinubu aimed at reviving Africa's largest economy.

The data, which marks the 11th consecutive quarter of growth, is the first release since Tinubu embarked on the country's boldest reforms in decades to try to boost output, which has been sluggish for several years.

"This growth rate is lower than the 3.54% recorded in the second quarter of 2022 and may be attributed to the challenging economic conditions being experienced," the National Bureau of Statistics (NBS) said.

Tinubu has scrapped a popular but costly petrol subsidy and lifted foreign exchange trading restrictions. But the action has worsened inflation, currently in double-digits, fueling anger and frustration for a population grappling with a cost of living crisis.

Tinubu, in his inauguration in May, vowed to expand the economy by at least 6% a year, lift barriers to investment, create jobs, and unify the exchange rate, while also tackling rampant insecurity.

He inherited a struggling economy with record debt, shortages of foreign exchange and fuel, a weak naira currency, inflation at a near two-decade high, skeletal power supplies, and falling oil production due to crude theft and underinvestment.

Nigeria, Africa's top oil producer, recorded an average daily oil output of 1.22 million barrels per day (mbpd) in the second quarter, down from the daily average of 1.43 mbpd registered in the same quarter of 2022.

The dominant oil sector, which accounts for the bulk of government revenue and 90% of foreign-exchange reserves, contracted 13.43%.

The NBS said second-quarter growth was driven by the services sector, which grew 4.42% year on year.

While the reforms introduced by President Tinubu have had a short-term negative impact on the economy, they are part of a broader plan to stimulate long-term growth and attract much-needed investment.

By removing petrol subsidies and lifting foreign exchange trading restrictions, Tinubu aims to reduce the government's fiscal burden and create a more favorable environment for businesses to operate.

However, these measures have led to rising inflation, making it more challenging for the average Nigerian to afford basic goods and services.

Rising inflation and the cost of living crisis have sparked anger and frustration among the population, increasing pressure on the government to find ways to alleviate the hardships faced by ordinary citizens.

President Tinubu has acknowledged these challenges and has reiterated his commitment to expand the economy, create jobs, and address the security concerns that have hampered Nigeria's progress.

Furthermore, the decline in oil production highlights the need to diversify Nigeria's economy and reduce its dependence on oil revenue.

The services sector's positive growth in the second quarter shows promising potential for economic diversification and job creation outside of the oil industry.

As Nigeria continues to navigate these economic reforms, it is crucial for the government to strike a balance between short-term challenges and long-term goals.

Efforts should be made to cushion the impact of rising inflation on the most vulnerable segments of society, while simultaneously implementing measures to attract investment, stimulate job creation, and improve security.

With the determination and resilience of the Nigerian people, coupled with strategic governance, Nigeria's economy has the potential to overcome its current hurdles and achieve sustainable and inclusive growth.

Source of content: OOO News 2023-08-25 News

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