Nigeria surrenders title as largest economy in Africa as Naira slides against Dollar

Confidence towards the Nigerian economy took a hit following recent reports that the nation lost its title as the largest economy in Africa to South Africa. With the current GDP at $296 billion according to Bloomberg, Nigeria has become the second largest economy in Africa after gripping the first position for two years. There has been a myriad of factors which have pressured the Nigerian economy and the nation could be commended for its resilience to holding such a title despite the constant assaults on economic growth. The extended periods of depressed oil prices simply eroded government revenues while Naira vulnerability after the floatation caused inflation to spiral out of control. 

Fears still linger that the Naira could weaken further while GDP growth could follow a slippery decline consequently weighing heavily on overall sentiment. Although the view towards the nation is still bearish, it should be kept in mind that steps have been taken to diversifying away from being heavily oil-reliant. There still exists some optimism that Nigeria could claw out of this hole and potentially reclaim its title as the largest economy in Africa if the blueprint to diversifying is followed carefully. Dollar sensitivity has become a dominant theme in the currency markets as US interest rate expectations continue to fluctuate. Although July’s positive NFP initially bolstered hopes of the Fed taking action in 2016, the soft US labor productivity simply created a cloud of uncertainty which left the Dollar in a fierce tug of war. The Dollar could be poised for further inclines if data from the US repeatedly beats expectations. Looking at commodities, WTI Crude has been on a wild rollercoaster ride this month with talks of potential production freezes creating speculative boosts in oil prices. Oil has been plagued by oversupply concerns and could be poised for steeper declines if the combination of oversupply fears and falling demand encourages bears to attack. Investors could be provided some clarity at the informal OPEC meeting in September, but if this concludes without a solution then Oil could decline towards $40.

Read more at: http://www.vanguardngr.com/2016/08/naira-slides-dollar-nigeria-surrenders-title-largest-economy-africa/