Algeria

ALGERIA is world’s tenth-largest proven natural gas reserves, the third-highest technically recoverable shale gas resources and the third-largest proved crude oil reserves in the region.

It is a pioneer and leader in LNG exports, Europe’s second-largest natural gas supplier after Russia and a key hydrocarbon provider to Southern Europe. Algeria is an Opec member and an active promoter of the Gas Exporting Countries Forum.

Algeria is the region’s wealthiest country in terms of purchasing power parity with the per capita income of $13,823 on purchasing-power parity basis. Hydrocarbons account for a quarter of GDP, 60pc of budget revenues, and over 95pc of export earnings. But, having peaked in 2005, Algeria’s oil and gas output has been steadily declining.

Algeria’s economy was able to maintain respectable growth in 2015 at 3.9pc due to the first increase of hydrocarbon output in a decade and a stable non-hydrocarbon growth. In 2016, its economy grew at a slightly slower rate of 3.6pc.

Over the next two or three years, the growth is expected to decelerate as the government implements fiscal consolidation measures. In 2017 and 2018, a substantial increase in hydrocarbon output, as new oil wells start to produce, will mitigate the negative effect of the projected oil price decline on the real non-oil sectors.

The government is committed to breaking away from the oil-based economy over the next decade with a focus on industry, agriculture and tourism. The country is experiencing a major housing crisis, high consumer prices, low salaries and a widening gap between social classes.

Sustained growth has been achieved at the cost of a widening fiscal deficit, which more than doubled to 16.2pc of GDP in 2015. Despite narrowing, the deficit remained large at over 13pc in 2016 but is expected to narrow gradually to 8pc in 2018.

With fiscal savings depleted, the deficit is expected to be financed by the issuance of new debts with the debt-to-GDP ratio projected to rise from 13.6pc of GDP in 2016 to 25.1pc in 2018.

Foreign exchange reserves have fallen to an estimated $108bn in 2016 from $178bn two-years earlier and are projected at $60bn in 2018. Despite the decline, these reserves are still high at above 20months of import-cover.

Nigeria

Nigeria has a population of about 173m, half of which lives on less than $1 a day. Its oil reserves estimated at 37bn barrels are about 28pc of total African reserves.

Oil and gas exports accounted for over 90pc of goods exports and roughly 75pc of the country’s consolidated budgetary revenues prior to the current oil shock.

Nigeria has had sluggish economic growth since the end-2015, adversely affected by external shocks, in particular a fall in the global price of crude oil. Growth slowed sharply from 6pc in 2014 to an estimated three-percent in 2015, leading the authorities to adopt an expansionary 2016 budget aimed at stimulating the economy.

The year 2016 ended with a negative 1.5pc growth, Nigeria’s first full-year contraction in almost three decades. Besides 14pc contraction in oil and gas, major economic sectors such as construction and manufacturing contracted by 6pc and 4pc respectively.

Lower hydrocarbons revenues, tight capital controls and currency volatility made 2016 a challenging year.

After almost a year of negative-growth, the economy is signaling an end of the recession in 2017 and is currently going through a structural reforms, attracting a series of investments that may translate to a major recovery.

The Budget and Planning Ministry in its Medium Term Expenditure Framework projects the economy to grow at 3pc in 2017, 4.3pc in 2018 and 4pc in 2019.

While endorsing Nigeria’s ERGP, the IMF is of the view that fiscal consolidation is highly needed as the plan alone was just not enough to drag the economy out of recession. The fund has urged the country to reform its volatile foreign exchange market, as resolve the multiple exchange rates system and lower an artificially high naira valuation.

ERGP has an ambitious growth target to restore the economy through sustained growth from 2017 to 2020. It targets GDP growth at 2.2pc in 2017 and 7pc by end 2020.

Moody’s expects the economy to bounce back to 2.5pc in 2017 from its 1.5pc contraction in 2016. Two-thirds of 2017 growth would come from the oil sector rebound alone, while strong base effects are expected in the second and third-quarter.

It also predicted that the federal government deficit would remain around 2pc in 2017 and 2018. But without the political will to carry out crucial reforms, Nigeria will hinge its economic stability on Opec’s fragile production deal.

Published in Dawn, Business & Finance weekly, April 24th, 2017