* Fall in global oil prices, weaker Naira blamed
* Non-oil sector sees shallow contraction, raises Q1 hopes
* Recovery will depend on government spending, FX reserves
(Adds vice president saying recession may have bottomed out in
By Chijioke Ohuocha and Ulf Laessing
LAGOS, Feb 28 Nigeria's economy contracted 1.5
percent in 2016 due to lower oil revenues and a shortage of hard
currency, the National Bureau of Statistics said on Tuesday, its
first annual contraction in quarter of a century.
Africa's largest economy slid into recession in the second
quarter of 2016 as a slump in crude prices hammered the OPEC
member's public finances and battered the naira currency. Crude
sales make up two-thirds of government revenue.
"This contraction reflects a difficult year for Nigeria,
which included weaker inflation-induced consumption demand, an
increase in pipeline vandalism, significantly reduced foreign
reserves and a concomitantly weaker currency," the statistics
office said in a report.
The International Monetary Fund had predicted Nigeria's
economy would shrink 1.8 percent in 2016. A Reuters poll
forecast a 1.2 percent contraction..
Fourth-quarter national output shrunk by 1.3 percent, it
said. However, non-oil sector production fell by only 0.33
percent during the three months to end-December.
Oil production - Nigeria's economic mainstay - fell to 1.833
million barrels a day last year after 2.13 million bpd in 2015,
it added, blaming militant attacks in the Niger Delta oil hub.
Vice President Yemi Osinbajo said in a statement the GDP
data suggested Nigeria was "well on its way out of recession".
"The expectation is that this trend and the slowing down of
month-on-month inflation will enable an early return to positive
growth in the economy," the statement said.
DOLLAR RESERVES RISING
Nigeria has been running short of dollars as a result of
lower foreign exchange earnings, which has weakened the local
currency on the black market, where it trades far lower than the
official interbank rate of 305 naira.
Foreign exchange reserves rose to a more than 19-month high
of $29.45 billion as of Feb. 24, central bank data showed on
Tuesday, but still remain far off their peak of $64 billion in
Though the central bank has stepped up dollar supply in
recent days after effectively devaluing the naira for private
individuals, the currency still trades at a more-than 30 percent
premium on the black market.
A Reuters poll last week showed analysts expect policymakers
may devalue the naira soon, but won't fully relinquish
control over it.
Cobus de Hart, senior economist at NKC, said he expected the
economy to recovery slowly, driven by higher government spending
on infrastructure and increased oil production.
The government targets an annual growth rate of 7 percent
GDP by 2020, as part of its medium-term economic
But the strength of the recovery will depend on the pace at
which authorities can put in place much-needed reforms, said
Razia Khan, chief economist for Africa at Standard Chartered
"The very shallow contraction in non-oil GDP growth in Q4
2016, raises hope of a more meaningful recovery in non-oil GDP
in Q1 2017, buoyed both by improved budget spending and some
improvement in FX availability."
(Additional reporting by Felix Onuah and Oludare Mayowa;
Editing by Richard Lough)