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Nigeria: Country to Earn Additional $10bn From Oil Revenue - Global Bank
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Leadership (Abuja)
13 May 2008
Posted to the web 13 May 2008
Abuja
It was good tidings the recent economic assessment on Nigeria by global investment bank, Goldman Sachs, when it revealed that the country might earn an additional $10 billion in annual oil revenues at the current oil prices from increase in oil production from 2.5 million barrels per day to three million barrels per day. In addition, it also disclosed that Nigeria's local currency, the naira, would appreciate by five per cent within the next one year.
In its report titled "New market analysts", Goldman Sachs said Nigeria had continued to post strong economic numbers, largely on the back of high energy prices. Oil and gas, which represent over 95 per cent of exports, it noted have contributed to robust growth performance, with Gross Domestic Product (GDP) reaching 7.6 per cent in 2007. But the country faces increasing inflationary pressure, largely from food prices.
The report pointed out that the Central Bank of Nigeria will continue to use naira appreciation to contain inflation over the next year, and forecast the currency to strengthen by five per cent from the present US$/NGN 117 to US$/NGN 112 in 12 months; this comes after the 8 per cent move over the past six months.
The naira has appreciated from N125 to a dollar since August 2007 to currently N117 to a dollar at the official foreign exchange market.
The global investment bank noted that solid economic performance enjoyed by the country was helped by strong commodity prices. It added that Nigeria had a solid trade balance, driven by rapid export growth, which it noted resulted in a current account surplus equivalent to seven per cent of GDP in 2007.
The report stressed that "on the capital account side, Foreign Direct Investment (FDI) in the oil and gas sector has meant that FDI has nearly doubled in just two years. This combination of large current account surpluses and strong FDI inflows puts pressure on the naira to appreciate. The country has managed to keep inflation in single digits, despite surging food prices, thanks in part to the Central Bank of Nigeria's policy of steady currency appreciation. We expect a further five appreciation of the naira to the dollar over the next 12 months."
The investment bank, however, noted that Nigeria has faced inflationary pressure, mainly through higher imported food prices. This, it added, has made naira appreciation an effective tool to combat imported inflation.
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The Federal Government has set a goal of making Nigeria one of the 20 largest global economies by the year 2020 through an annual growth rate of 13 per cent. South Africa is currently the 20th largest global economy.
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