Nigeria suffers worst economic recession in 36 years – World Bank

Amid rising debt profile, inflation and unemployment, Nigeria, Africa’s biggest economy, has entered its second recession in five years as official figures published on Saturday showed that the economy shrank again in the third quarter of this year.

This year’s recession is the worst in 36 years as data obtained from the World Bank showed that the country’s GDP dropped by 10.92 per cent in 1983 and 1.2 per cent in 1984.

The World Bank said in June that the collapse in crude oil prices, coupled with the COVID-19 pandemic was expected to “plunge the Nigerian economy into a severe recession, the worst since the 1980s”.

The NBS, in its Gross Domestic Product report for Q3, said the GDP, the broadest measure of economic prosperity, fell by 3.62 per cent in the three months up till September.

For the first time in more than three years, the Nigerian economy shrank in Q2 as the GDP fell by 6.10 per cent, compared with a growth of 1.87 per cent in Q1.

Economists consider two consecutive quarters of shrinking GDP as the technical definition of a recession.

“The performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the COVID-19 pandemic,” the NBS said.

It said as the restrictions were lifted, businesses reopened and international travel and trading activities resumed, some economic activities had returned to positive growth.

“A total of 18 economic activities recorded positive growth in Q3 2020, compared to 13 activities in Q2 2020,” it added.

The statistics office said aggregate GDP stood at N39.09tn in nominal terms and N17.82tn in real terms in the period under review.

It said the average daily oil production recorded in Q3 dropped to 1.67 million barrels per day from 2.04 million bpd in the same quarter of 2019 and 1.81 million bpd in Q2 2020.

The oil sector contributed 8.73 per cent to total real GDP in Q3, down from 9.77 per cent and 8.93 per cent respectively recorded in Q3 2019 and Q2 2020.

The contribution of the non-oil sector to the GDP, however, increased to 91.27 in Q3 from 90.23 per cent in Q3 2019 and 91.07 per cent in Q2 2020.

The NBS said in August that the economic decline in Q2 was largely attributable to significantly lower levels of both domestic and international economic activities resulting from nationwide shutdown efforts aimed at containing the COVID-19 pandemic.

It said the contraction in Q2 brought to an end the three-year trend of low but positive real growth rates recorded since the 2016/17 recession.

The country has seen its debt, inflation and unemployment levels rise this year – a development many experts have described as worrisome.

Total public debt, constituting both the federal and state governments’ external and domestic debt, in the first half of 2020 stood at N31.01tn or 22.3 per cent of GDP, a sizeable increase of 20.6 per cent over its level at the end of June 2019, according to the Central Bank of Nigeria.

The CBN, in its half-year 2020 economic report, said total public debt outstanding was driven by rising fiscal deficits and associated borrowings, induced by low revenue inflow in the face of relatively high expenditure.

It said the rising cost of debt service underscored “a precarious liquidity position that could impair the government’s fiscal space, as well as its growth objectives”.

Inflation rate in the country jumped to 14.23 per cent in October from 13.71 per cent in September, according to the NBS.

Analysts at Financial Derivatives Company Limited, led by Mr Bismarck Rewane, said the policy of restricting imports despite numerous impediments to local supply would remain a major driving factor for rising inflation in the coming months.

“The unrelenting rise in inflation coupled with a deeper contraction in Q3 GDP will make the outcome of the MPC (Monetary Policy Committee) meeting a tough call,” they said in their latest monthly economic update.

The MPC of the CBN will hold its next meeting on Monday and Tuesday.

The bureau said in August that unemployment rate rose to 27.1 per cent in Q2 2020 from the 23.1 per cent recorded in Q3 2018, while underemployment rate increased to 28.6 per cent from 20.1 per cent.

Last week, the Chairman of the Presidential Economic Advisory Council, Prof Doyin Salami, described the country’s economic challenge as “a very significant and potentially severe one, saying 19 million jobs needed to be created yearly to solve the unemployment problem.”

The Nigerian economy, which emerged from its first recession in 25 years in Q2 2017 when it posted a 0.7 per cent growth, had continued its slow recovery since then but the COVID-19 crisis made things worse.

In 2016, the economy slipped into recession in Q2 as the GDP shrank by 2.1 per cent after falling by 0.4 per cent in Q1 on the back of the steep fall in global crude oil prices and the country’s production volumes. – Punch.

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