On a day Hillary Clinton, US secretary of state, told African leaders that foreign investors cannot be attracted in an atmosphere of failed leadership and civil unrest, Lamido Sanusi, governor of the central bank, added a critical caveat to achieving economic growth in Nigeria – resolving the crisis in the Niger Delta.
Speaking from the same platform in Kenya where Clinton admonished African leaders on the imperative to curb corruption, Sanusi gave an optimistic growth forecast of five percent for the economy this year, but predicated its attainment on a solution being found in the troubled, oil-producing Niger Delta.
Once a darling of frontier markets specialists, the Nigerian economy — sub-Saharan Africa’s second biggest — has faltered in the global downturn with the collapse of world oil prices.
“About five percent is GDP expectations but a lot depends on what happens with progress in the Niger Delta,” Lamido Sanusi said, referring to the heartland of Nigeria’s oil and gas sector.
Nigeria’s status as Africa’s biggest energy producer is under severe threat from Angola, southern Africa’s emerging oil giant, as militants’ attacks on oil production have led to about 30 percent shut in of Nigeria’s oil export.
Militants, who say they are fighting for equitable distribution of the oil wealth, often strike oil installations run by foreign firms in the delta and have sometimes kidnapped oil workers employed by foreign oil majors.
President Umaru Yar’Adua’s government has offered an amnesty to the rebels in a bid to bring stability to the region.
“The biggest problems of the delta are being resolved at the moment but they will not be resolved overnight,” Sanusi said in an interview with Reuters in the margins of an African-U.S. trade meeting.
“There is a reduction in the rate of kidnappings and violence. There is a gradual acceptance of the need for peace,” he said.
The five percent growth estimate compared to a 9.5 projection in the federal budget.
Sanusi said, however, that overall economic expansion in Africa’s most populous state could be supported by growth from the non-oil sector.
The World Bank put expected growth in the non-oil sector for Africa’s biggest energy producer to come in at eight percent this year.
Sanusi said his central bank would step into the money markets if factors other than supply and demand came into play.
“We will intervene if we think there is panic or speculation, but we do think we have enough at the moment, to have a stable currency and interest rates,” he said.
Regulators have scrambled to defend the naira this year after sharp falls against the dollar.
In the bank’s first monetary policy meeting under Sanusi, the bank cut its lending rate by 200 basis points, lifted foreign exchange controls and undertook to guarantee interbank transactions for the next nine months.
“The signals are really clear, we would like to see low interest rates at this time because we think growth is going down,” he said, adding the interbank rates have fallen to about 10 percent from 20 percent before the cut.
Sanusi said that, with time, the benefits of the rate cut and subsequent falls in the interbank rate, will be passed onto consumers. And he added that the price of oil was firming in the second half, helping the growth outlook.