Oil Prices Will Compromise Nigeria’s Growth Prospects- Frost & Sullivan

Yemisi Izuora/Agency Report
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Frost & Sullivan has said that
falling oil prices is likely going to govern economic outlook of emerging Middle Eastern and African Countries.

It said however, that the Kingdom of Saudi Arabia, UAE and Egypt can ride the drop in oil prices while growth prospects of Nigeria and Algeria will be severely compromised

The economic indicators of emerging Middle Eastern and African (MEA) countries for H2 2015 point to a mixed bag of possibilities and challenges.

While growth in the Kingdom of Saudi Arabia (KSA), the United Arab Emirates (UAE) and Egypt will pick up pace, Algeria and Nigeria will continue to grapple with the decline in exports and depreciation in currency.

New analysis from Frost & Sullivan, Global Economic Tracker – Insights and Trends (GET-IT) – Emerging Middle East and Africa Q2, 2015, presents economic and industry indicators for the KSA, UAE, Egypt, Algeria and Nigeria.

The study provides estimates for 2015, a short-term forecast for Q1 2015 to Q4 2017, and medium-term forecasts from 2016 to 2018 for select indicators.

“Declining oil prices multiply the significance of diversification,” said Krishanu Banerjee, Senior Research Analyst, Emerging Market Innovation, Frost & Sullivan.

“Therefore, the development of non-oil industries like agriculture, banking, finance and tourism will become central to economic progress.”

The KSA and the UAE will withstand the pressure of sinking oil prices owing to strong non-oil sector performance. High public spending on education, healthcare, transport and water infrastructure will spearhead the two economies.

The expansionary Purchasing Managers’ Indices of both countries will brighten business and consumer sentiments throughout 2015.

However, the depletion of Saudi Arabia’s foreign reserves will be a cause for concern in the last quarters of 2015.

As a major oil importer, Egypt will stand to gain from low oil prices, although financial aid from Middle Eastern countries is likely to drop in H2 2015 as oil revenues scale down. Ongoing political tension in the country will heavily dampen prospects in the tourism sector.

Largely reliant on earnings from oil and gas exports, Algeria and Nigeria will reel from low oil prices.

The Algerian Government’s investments in infrastructure as well as public welfare and subsidy schemes will remain subdued in H2 2015. Weak private consumption and an ongoing power crunch signal a bleak outlook for the second half of 2015 in Nigeria as well.

Diversifying the range of export products is an immediate requirement that MEA countries must address to guard against price volatility and strengthen their economy in the immediate future.

Global Economic Tracker – Insights and Trends (GET-IT) – Emerging Middle East and Africa Q2, 2015 is part of the Emerging Market Innovation program.

The Emerging Market Innovation program’s fundamental value proposition is to help define, design and drive an emerging markets strategy at a “macro” level and provide an ongoing pulse of changing conditions at the “micro” level.

The program is a structured approach to identify, evaluate and prioritise a country’s pipeline system that leverages a data-driven best practices approach towards emerging market strategy.

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