The floods that ravaged various states across the nations have affected the economy negatively.
Nigeria’s economic growth has weakened to less than seven per cent due to a slow-down in the non-oil sector activity, especially agriculture and its wholesale and retail trade, in 2012, a finance expert has said.
This reduced growth is directly linked to the insecurity in northern parts of the country.
“Floods threaten to further undermine growth in this second half of 2012,” Yvonne Mhango, a Research Analyst at Renaissance Capital, an Investment Bank said.
To this end, she said, the firm projects a 6.3 per cent growth in 2012.
“We project growth of 6.3 per cent in 2012, down from 7.4 per cent in 2011. Floods also increase the upside risk to inflation, with inflation likely to return to the low double digits and the policy rate likely to remain flat at 12 per cent in the short term,” she said.
She said a major reason for this is the sharp tightening of the nation’s monetary policy in the last quarter of 2011, which affected access to credit facilities. This also partly accounts for the slow growth of the nation’s Gross Domestic Product’s, GDP, in the first half of 2012 to 3.4 per cent year on year, from 4.3 per cent year on year in 2011.
Wholesale and retail trade, financial intermediation, real estate, business services, and construction were the most affected sectors, due to their high exposure to credit.
With an already weakening growth in trade levels experienced between January and June, a further disruption could compound the sectors’ woes, Ms. Mhango said.
“Activity in the non-oil sector, Nigeria’s growth engine in recent years, has slowed in 2012, largely on account of agriculture and wholesale and retail trade.
“Insecurity in northern parts of the country partly explains the underperformance of these two sectors in the first half of the year” she said.
Ms. Mhango said floods threaten to further weaken the performance of the non-oil sector in the second half of 2012, having destroyed property, farmland and infrastructure across the country.
“An estimated 64 thousand people have been displaced. We think the destruction to households and the displacement of smallholder farmers will further weaken agriculture’s growth this other half of the year,” she said.
She added that distribution will also be hampered by the damage to transport infrastructure, which will have a negative impact on wholesale and retail trade and the transport sector.
“On the positive side, the rate of the oil sector’s contraction has slowed, due to an improvement in 2012 second quarter production. Any further improvement may offset softer non-oil GDP growth,” she said.