Nigeria Content Online

Rising oil prices and increased production are expected to drive
the nation’s economic growth higher this year although headline inflation is
seen remaining in double digits, a Reuters poll showed on Thursday.

Sub-Saharan Africa’s second-biggest economy, which grew 6.66
percent in 2009, is expected to grow 7.0 percent this year and 7.3 percent
next, according to the median of forecasts from nine analysts who took part in
the survey.

Nigeria is expected to export an average of 2.1 million barrels
per day (bpd) of crude oil in September, up slightly from an anticipated 2.08
million bpd in August, trade sources said this week. “The latest national
accounts data from Nigeria reinforce our view that the economy will expand
strongly in 2010,” said Alan Cameron, sub-Saharan Africa analyst for Business
Monitor International (BMI). “Although seasonal factors related to agriculture
have historically seen growth dip in the first quarter of the year, a sharp
rebound in the oil sector helped lift the overall reading well above the 4.5
percent recorded in Q1 2009.”

Headline inflation was expected to reach 11.5 percent for 2010,
but dip to 9.5 percent in 2011, the survey showed. Consumer inflation eased to
10.3 percent year-on-year in June, its lowest level for more than two years.
Nigeria’s benchmark interest rate has been on hold at 6 percent for more than a
year as the central bank prioritises stimulating growth despite the
inflationary risks.

Higher spending

Nigeria’s fiscal deficit is expected to widen to 3.5 percent of
GDP this year from 3.02 percent last, the second year in a row it will breach a
3 percent target set under a 2007 fiscal responsibility act, according to the
polls. The deficit was seen narrowing to 2.4 percent in 2011.

The National Assembly, last week, approved N445 billion in extra government
spending for 2010, including pay rises for civil servants, doctors and
professors. The supplementary budget was partly offset by a separate bill
trimming the original spending plans by N200 billion to 4.4 billion, but the
net result is still a significant rise in spending over last year.

“Inflation is expected to continue to register in double digit territory; on
the one hand benefiting from a good agricultural performance, but on the other
hand bearing the brunt of expansionary fiscal policies,” said Thalma Corbett,
chief economist at NKC Independent. “The current account surplus is forecast to
remain sizable on the back of a robust trade surplus.” The median forecast for
Nigeria’s current account surplus was 10.4 percent of GDP in 2010 and 10.8
percent next year, according to the Reuters poll.