The problems are piling up in Africa’s most populous nation.
Adding to the news that Nigeria has officially entered recession, the country’s statistics office has also announced that inflation has reached an 11-year high, while capital imports are at their lowest level on record.
Nigeria imported capital worth an estimated $647.1m in the second quarter of 2016, a decline of more than 75 per cent compared to the same period last year. The figure represents both the lowest figure and the largest annual decline on record, and Nigeria has now broken both records in two consecutive quarters.
The National Bureau of Statistics said “uncertainty surrounding future exchange rate policy” may have deterred investors during the period; the government introduced a more flexible exchange rate regime in June, though the gap between official and black market currency rates suggests the central bank has still been intervening to prop up the naira’s official value.
Any hopes that a cheap naira would attract more investors have thus far proved unfounded, with portfolio investment declining by almost 90 per cent year on year.
For consumers, meanwhile, the naira’s drop, along with rising energy prices, helped annual inflation to grow for a ninth consecutive month in July to 17.1 per cent.
While this figure is high, some economists have estimated that the real number is much larger. Professor Steve Hanke, applied economist at Johns Hopkins University, estimates that Nigeria’s annual inflation rate could be over 80 per cent.
The central bank raised the main interest rate by 200 basis points last month in an attempt to combat inflation. Razia Khan, chief Africa economist at Standard Chartered, says she expects a further rate rise at the next monetary policy meeting in September.
Chart courtesy of Professor Steve Hanke at Johns Hopkins University
Get alerts on Nigeria when a new story is published