In the second consecutive quarter, GDP contraction has seen Africa’s top oil producer slip into recession once again. This becomes the second recession within five years for Nigeria. The country had experienced a recession in 2016.
A consistent drop in GDP for two consecutive quarters spelled out recession for the West African country. This follows a previous government prediction that the economy may contract by 8.9% in a stimulus-free worst-case scenario.
Africa’s top oil producer
Nigeria relies on crude oil exportation, which totals 90 percent of its foreign exchange earnings. The country normally registers an average output of two million barrels a day and has 18 operating pipelines. This has made Nigeria the continent’s top oil producer and the world’s eleventh largest oil producer.
Recently, the Covid-19 pandemic, amid low, oil prices has reduced production to roughly 1.4 million barrels, up from over 2million barrels per day.
Covid-19 hits hard
Covid-19, which first struck Nigeria in February 2020, prompted a four-month lockdown in its capital Abuja and economic core, Lagos. A ban was also imposed on interstate travel.
“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,” said the statistics office in a report published on Saturday.
The report further highlighted that lifting the restrictions had resulted in the reopening of businesses and resumption of trading activities and international travels. Some economic activities have also returned to “positive economic growth.”
The figures
On Saturday 21 November 2020, the Bureau of Statistics said Nigeria’s economy recorded a 3.62% GDP contraction in the 2020 third quarter. The country had already registered a 6% GDP declined in the second quarter, making the cumulative GDP go down by 2.48% over nine months.
According to Financial Times, oil production has downed to 1.67million barrels, up from 1.81 million barrels a day in the previous quarter.
Factors contributing to this decline include the oil sector’s contraction by 13.89% in the third quarter compared to 6.49% growth in a similar period last year. The second quarter had previously recorded a 6.63% contraction.
Moreover, non-oil sectors shrank by 2.51%, decreasing from the previous quarter’s decline of 6.05%. This implies an improvement in the sector.
Predictions
During the 2016 recession, Nigeria registered a recovery in 2017. Ever since the economy has been slowing down, how first it will recover this time is still a contention bone. The Nigerian economy private sector is also experiencing a dollar shortage despite importing close to all their equipment and raw materials.
The International Monetary Fund (IMF) predicted that Nigeria’s GDP would fall by 5.4 percent in 2020, a 3.5 percent less than the government’s prediction of 8.9 percent.
The Central Bank of Nigeria is due to commence its policy meeting on Monday, 23 November 2020.
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- World Bank Predicts Sub-Saharan Africa Recession in 2020.
- World’s Greatest Countries Face Economic Recession
