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The World Bank has slashed Nigeria’s growth forecast for 2016 because of the continued impact of production outage and lower oil prices on the economy.

In its semi-annual Global Economic Prospects report released on Tuesday, the World Bank said the Nigerian economy is expected to grow by 0.8 per cent in 2016, down from a previous estimate of 4.6 per cent announced in January this year.

“In Nigeria, foreign exchange restrictions, fuel shortages, and oil output disruptions will weigh on economic activity, exacerbating the effects of low oil prices,” the World Bank said.

The downward revision of the World Bank’s forecast for Nigeria comes almost three weeks after the National Bureau of Statistics reported that the country’s GDP contracted by 0.36 per cent in the first quarter of 2016.

However, the World Bank expects economic growth to rise to 3.5 per cent in 2017 (down from an earlier estimate of 5.3 per cent) and 4 per cent in 2018 (down from an estimate of 5.3 per cent).

Across Sub Saharan Africa (SSA), the World Bank said the region’s economic growth is projected to slow further to 2.5 per cent in 2016, down from a previous estimate of 4.2 per cent in January as commodity prices remain low, global activity weakens, and financial conditions further tighten.

However, SSA’s economic growth is expected to rise to 3.9 per cent in 2017 (down from a previous estimate of 4.6 per cent) and 4.4 per cent in 2018 (down from 4.7 per cent earlier estimated in January).

“The projected pickup in growth is contingent on commodity prices stabilizing and on improvement in conditions in the region’s largest economies – Angola, Nigeria, and South Africa,” the World Bank said.

Against the background of lower private consumption, reduced investment growth, and tighter fiscal stances in 2016, the World Bank said economic activities in SSA’s three biggest economies – Nigeria, South Africa, and Angola – are expected to remain weak this year.

In South Africa, low business confidence will slow investment growth, while high unemployment and tight monetary policy will limit private consumption. In Angola, low oil prices, a weak investment climate, and rising inflation will weigh on growth.

The World Bank stated that reforming the labour and product markets is needed to spur private investment and enhance growth prospects in these countries.

Amongst SSA’s frontier markets, growth is expected to pick up moderately in Ghana, helped by improving investor sentiment, new oilfields, and the waning of electricity shortages. Growth is expected to remain subdued in Zambia owing to weak domestic demand caused by low copper prices, power shortages, higher interest rates and food prices stemming from the drought and a weak currency.

Growth is expected to remain robust in Cote d’Ivoire, Kenya, and Senegal, supported by ongoing infrastructure investment, private consumption, and investment in agriculture.

The World Bank said SSA countries, particularly commodity exporters, need to adjust to a protracted period of lower commodity prices by finding new sources of growth via appropriate policy responses.

The Washington D.C.-based multilateral institution said SSA countries have to strengthen domestic resource mobilization by improving non-resource tax systems. Furthermore, the Bank said SSA countries must exert greater effort to rebuild policy buffers such as rationalizing current expenditure, particularly the wage bill, and improve public financial management and the quality of spending.

The World Bank also said SSA countries may need to adopt exchange rate and monetary policy flexibility, where feasible, to help cushion the impact of the decline in commodity prices.