The economy under Nigerian President Muhammadu Buhari facing obstacles to achieve even a modest level of growth, Moody's reports. Pool photo by Ron Sachs/UPI | License Photo
DUBAI, United Arab Emirates, Sept. 2 (UPI) -- Subdued growth in the economy for oil-rich Nigeria could be undermined if the country's production levels don't recover, Moody's Investors Service said.
The Nigerian Bureau of Statistics said last month the economy had slipped into recession. A member of the Organization of Petroleum Exporting Countries, the oil-sector contribution to total real gross domestic product for Nigeria declined by 1.45 percent year-on-year.
Published from Dubai, Moody's said in a report the government of Abuja should be able to withstand some pressures, but rising inflation and other growth challenges remain.
"The government of Nigeria continues to face low oil prices, volatile oil production, a spike in inflation that has eroded purchasing power, foreign exchange scarcity and an economy that has entered technical recession," the report read. "Moody's projects stagnation in real GDP in 2016 and only subdued growth at 2.5 percent in 2017."
The Nigerian government said oil production during the second quarter declined almost 20 percent from the previous period. Among the region's largest economies, Nigerian crude oil production is at a 30-year low.
Burdened already by revenue lost to lower crude oil prices, Nigeria production is the target of a campaign from militant Niger Delta Avengers, one of the more active groups of its kind in the region. In an open letter to President Muhammadu Buhari, the movement said it ended its hostilities and was now calling for a restructuring of the country. It says the administration is sidelining the interests of the people in favor of oil interest in the Niger Delta.
On the financial front, Moody's said a government move to devalue the currency could help offset some of the loss from the oil sector, but could also push the rate of inflation toward 20 percent by the end of the year.
"We expect that Nigeria will contain pressures on its public finances in the short term," Aurelien Mali, a credit officer at Moody's said in a statement. "However, there is greater doubt about the severity of the impact of these challenges, particularly on government liquidity and economic growth, over the medium term."