Nigeria’s economy has remained sluggish despite recovering from a recession in 2017. Growth remains below 2.0%, with per capita growth consistently falling since 2015. Lack of key reforms means growth has largely depended on the oil sector’s performance. There is a risk that Nigeria will fall back into a recession in 2019 if oil prices fall below US$60 per barrel for any sustained period of time.

The Federal Government has little headroom to manoeuvre if oil prices fall and compress revenues, of which 69% is now consumed by interest payments on debt. The government has struggled to boost revenues but has nonetheless expanded expenditure by increasing its borrowing. Now interest repayments are beginning to put pressure on revenues and any fall in oil prices would trigger a fiscal crisis in 2019.

On the positive side, the fear of a fiscal crisis might force the government to take its privatisation plans more seriously in 2019.

The Federal Government will move to sell down some of its assets to help fund its expenditure in 2019. Assets that are likely to be put on sale could be some of its joint venture stakes with the IOCs. These plans have been on the drawing board since 2015 without any progression but a fiscal crisis might just force the government to make a move on it.

The government would also consider selling some its stakes and assets in the power sector and even in abandoned buildings that are littered across the country.

There is also a high risk of Naira depreciation in 2019 with some estimates forecasting the Naira trading at about ₦400 to the dollar by the end of Q1 of 2019. A continuous decline in external reserves — albeit remaining relatively strong — and falling capital inflows as well as oil price volatility will put pressure on the Naira and lead to its depreciation in 2019.

2019 will be a turbulent year for Nigeria’s economy and that degree of turmoil will largely depend on oil prices. It is the year that Nigeria undertakes painful reforms or risks continuous stagnancy and the consequent rising levels of poverty.