Risk-averse South African companies that are staying put in Nigeria, which is experiencing its worst recession in decades, might not have to wait too long for a reversal of the crippling downturn that has seen fuel shortages in which airlines compete with local consumers. Nigeria's economy shrank by 2.06% last month, resulting in a second quarter of decline this year and marking the country's worst recession in 29 years.This has made an already tough economic climate even worse for the major oil exporter after oil prices collapsed two years ago. Among the challenges is a super-high inflation rate of 17%. In June the Nigerian government allowed its battered naira currency to trade freely after fixing it in February last year to prevent it falling as oil prices plunged. The resultant black market trade in dollars damaged the economy.But the light at the end of the tunnel may be closer than some think, said London-based Capital Economics economist John Ashbourne.As early as the first quarter of next year, Nigerian economic growth could improve to 2.5% - and in the next two years it could reach 3.5%. (In the past Nigeria has reached growth rates of 6% and 7%.)story_article_left1Ashbourne said Nigeria's problems in the first half of the year were due to a drop in global oil output and not disruption of oil production in the Niger Delta. "It's pretty unlikely that production will fall as much again. It's already at a 20-year low. Provided that oil output stabilises in volume terms, that should remove a pretty big weight from the economy."Brent crude oil is expected to lift from $45 a barrel to around $58 a barrel by the end of next year.Among South African businesses that have left Nigeria in the past few years are Woolworths, Truworths, Foschini and Tiger Brands. Sun International decided to leave for other reasons besides weak growth, such as clashes with shareholders.But other companies have taken a different view. Ben Kruger, Standard Bank South Africa joint CEO, regards Nigeria as a growth economy and said that although the economy could end the year in recession, there will be recovery next year. "From a macroeconomic point of view the recovery next year will still be slower than what people think - but I think in two years we would definitely start expecting Nigeria to grow again, closer to the levels where it had been growing."Nigeria's size, with a population of about 180million, was a strong drawcard and the market presented an opportunity for lending, which was low in Nigeria, said Kruger. Standard Bank's personal wealth business in Nigeria is performing well and its relationships with multinationals are growing. Kruger said it was encouraging to see that many multinationals were still investing in Nigeria.However, Martyn Davies, MD of Emerging Markets and Africa at Deloitte, said there was still no sight of green shoots in the economy. "The economy and asset value need to correct and this will take more time."Nevertheless, several South African companies are taking an optimistic view. Massmart opened a Game store - its fifth store in Nigeria - at the new Lekki mall in Lagos last month. It will open two more stores in Nigeria in the next 18 months -despite poor logistics infrastructure that hampers deliveries and the difficulty in finding suitable sites for stores.block_quotes_start There is a surge in demand for kerosene for heating and cooking during the rainy season, when wood and charcoal are not readily available block_quotes_endCape Town-based Novare Real Estate Africa, which developed the Lekki mall, said the number of shoppers in its malls had not declined, despite the recession.Derrick Roper, CEO of Novare Equity Partners, an associate of Novare Real Estate Africa, said: "We are seeing a resilient underlying consumer. For example, many [Nigerian] consumers who used to do their shopping in the US, South Africa or Europe now do it in the country."He believed the Nigerian economy was at the bottom of its cycle.In Abuja, Novare will launch a mall late next year and an office and shop development in 2018.Mike Whitfield, Nissan South Africa MD, expected the Nigerian recession to hamper local sales and the supply of components and vehicles from South Africa in the short term. However, he said, the government intended to diversify the economy beyond oil and manufacturing and this would spur growth. As Nigeria was an important regional hub for Nissan, the company was not solely reliant on the local economy, he said.story_article_right2SAA spokesman Tlali Tlali said the airline was refuelling in Nigeria and had not reduced flights - unlike other international airlines which are reportedly refuelling outside the country because of pricey Nigerian jet fuel.Reuters reported that the scarcity of fuel has pitted some airlines against local consumers. There is a surge in demand for kerosene for heating and cooking during the rainy season, when wood and charcoal are not readily available, and if airlines do not pay up, marketers will sell to locals.Tlali said passenger numbers had increased by 11%. "Passengers to and from most of our regional destinations are not deterred by recessionary trends. They are resilient and travel for their own purposes."But Dianna Games, executive director of the South African-Nigerian Chamber of Commerce, said business confidence in Nigeria was low. Official figures published last month showed a decline in 15 of the 16 manufacturing subsectors.Games said Nigerians were hoping for relief from the government, but it had not materialised "despite the president quite regularly saying he is aware of the hardships".- Additional reporting by Dineo TsamelaSpeckmanA@sundaytimes.co.za..