Boston, MA -- (ReleaseWire) -- 05/14/2014 -- Nigeria's economy was the world's 24th largest economy in 2013 after the results of a recalculation of GDP were announced in early April 2014. The change represents the evolution of Nigeria's economy over recent years with secondary and tertiary industries now contributing a larger share of GDP. The agriculture sector is not only smaller relative to GDP than previously thought but is also growing more slowly suggesting that agricultural reforms have not been as successful as many assumed. Despite being measured from a much higher base, we believe that the economy will continue to expand by around 7.0% per year over the next few years as the contribution of the sluggish oil sector has been taken up by more dynamic industries such as manufacturing and services. Nigeria is facing several challenges in the lead-up to the 2015 election, any one of which could pose a threat to broad political stability and economic development. However, we believe that the country will be able to navigate these issues and avoid disaster. Nonetheless, we note that reform of the political system will be crucial if the country is reduce its susceptibility to these kinds of risks. Nigeria's balance of payments position is under pressure due mainly to large outflows of capital. Rather than being the result of foreigners withdrawing from the country, the data suggest that this is the result of Nigerians sending money abroad. With political and macroeconomic uncertainty likely to persist until after the election in early 2015, we believe that this pressure will remain in place for the remainder of 2014. We believe the Central Bank of Nigeria's decision to raise the private sector cash reserve requirement but leave the public sector CRR and benchmark policy rate unchanged was an attempt to demonstrate that tight policy will remain the order of the day following the removal of Sanusi Lamido Sanusi. We do not expect that the decision will have a meaningful impact on financial markets or the economy. However, we believe that the authorities will tighten policy more aggressively in the months ahead, in a bid to stave off depreciatory pressure on the currency.
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