Nigeria was dragged out of recession by a recovery in oil prices over 2017, with the diversification of revenue sources a key aim to ensure stability going forward.

Nigeria has been on somewhat of a rollercoaster over recent years. A rebasing of GDP made it Africa's largest economy in 2014, but falling oil prices put the brakes on growth and eventually shifted the economy into reverse in 2016. Over five quarters, the Nigerian economy contracted, eventually reversing the trend in 2Q2017 when it grew 0.55%, ending its worst recession in 25 years. And while OPEC cuts may have stabilized the price of oil in the medium term, the Nigerian government is well aware of the need to diversify revenue streams if it is to avoid volatility moving forward. Introduced in 2017, the Buhari government's Economic Recovery and Growth Plan (ERGP) is an ambitious attempt at developing a new path forward.

Growth in the short term is set to be sluggish, with the IMF predicting economic expansion of 0.7 to 0.8% in 2018. However, government officials are confident that benchmarks can be met for the 2018 budget. The ERGP envisages the removal of constraints on growth and, significantly, a focus on government collaboration with the private sector. Much effort will revolve around the streamlining of the regulatory environment, an endeavor that also includes President Muhammadu Buhari's determination to tackle corruption. Regulatory environmental changes are a major part of the government's push to improve the larger macro environment, but there are also plans to align the nation's monetary policies to ensure that all parties involved are working toward the shared goals of low inflation, stable exchange rates, and reasonable fiscal balance sheets. The Central Bank of Nigeria has in the past few years played a more active role in aggressively directing monetary policy to fight inflation and capital flight, and it is expected to only broaden its role as overseer of the Nigerian fiscal system. Additional new taxes on luxury items and a tighter customs regime are expected to help boost revenue, as well. Still, Nigeria will remain an oil giant with many challenges to tackle if it wants to get the most out of its natural resources. Thought to have the world's 11th-largest oil reserves, the combination of low prices and repeat attacks on Nigeria's oil infrastructure by the Niger Delta Avengers plunged production from 2.2 million bpd to barely 1.4 in mid-2016, the lowest rate for Africa's largest producer and biggest economy in a quarter century. Since then it has rebounded, beginning 2017 at 1.7 million bpd and finishing the month of July at 2.03bpd, making Nigeria the 14th-largest producer in the world.
Yet even in the darkest days of 2016, Nigeria's struggling petroleum industry received two boons from the international “petroleum" community: in June 2016 Nigeria signed USD80 billion of energy-related deals with China, covering everything from the rehabilitation of older facilities and refineries to the construction of new pipelines, and the decision by OPEC in November 2016 to exempt the country from that body's planned production cuts of 1.2 million bpd to total OPEC output of 32.5 million. For a country that relies upon petrodollars for 90% of its hard currency, the past two years have seen Nigeria plunge into its worse recession in generations. As such, President Buhari has not been shy about reaching out to Beijing. First securing USD6 billion in infrastructural loan pledges on a visit to China in April 2016, in June Nigeria's state-owned oil company Nigerian National Petroleum Corporation (NNPC) reached agreements with 38 separate Chinese firms, including oil giant Sinopec and weapons-maker Norinco, to upgrade the country's energy infrastructure. Ironically, Africa's largest oil producer already imports most of its fuel because its refineries are too run down.
Elected in March 2015 in no small part based on promises to reform the NNPC and bring transparency to the country's most profitable and notoriously corrupt industry, Buhari's administration promised since 2015 to break the 40-year old loss-making NNPC originally up into 30 smaller “profit-making" companies. In May 2017, it finally began to act on said promises by bringing the much-awaited Petroleum Industry Governance Bill to the upper house, where it duly passed and was later ratified. If fully implemented, the bill will break up NNPC into three smaller commercial entities, namely the Nigeria Petroleum Assets Management Company, the National Petroleum Company, and the Nigeria Petroleum Liability Management Company. Two additional bodies, one regulatory (the Nigeria Petroleum Regulatory Commission), and one fund (Petroleum Equalisation Fund), would oversee that distribution and compliance among the three commercial bodies are legal, seamless, and timely.
Nigeria's economy has long been heavily dependent on oil, but the new ERGP is laying the groundwork for a more diverse and stable future. Although it could take some time for Nigeria to be cured of its oil addiction, there is a real appetite for change at the top.