Nigeria is back in a recession for the second time in four years, no thanks to COVID-19 and the crash in oil prices triggered by the pandemic.
The Gross Domestic Product (GDP) contracted for the second consecutive quarter this year, recording a growth rate of -3.62 per cent (year-on-year) in the Third Quarter (Q3), according to figures published yesterday by the National Bureau of Statistics (NBS).
“Cumulative GDP for the first 9 months of 2020 therefore stood at -2.48%,” NBS Statistician General Yemi Kale, said on Twitter.
He said the oil sector contracted by 13.89% in the third quarter against growth of 6.49% in the same period a year earlier, while the non-oil sector shrunk by 2.51% in the three-months to September.
Much of the economy was on lockdown between late February and early May on account of the coronavirus pandemic.
The NBS in a report “Nigerian Gross Domestic Product Report – Q3 2020” yesterday however said the Q3 contraction was an improvement of 2.48 per cent points over the –6.10 per cent growth rate recorded in the preceding quarter (Q2 2020).
It said growth in Q3 2020 was slower by 5.90 per cent points when compared to the third quarter of 2019 which recorded a real growth rate of 2.28 per cent year on year.
“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 bureau said.
As these restrictions were lifted, businesses re-opened and international travel and trading activities resumed, some economic activities have returned to positive growth.
It added: “A total of 18 economic activities recorded positive growth in Q3 2020, compared to 13 activities in Q2 2020.
“During the quarter under review, aggregate GDP stood at N39,089,460.61 million in nominal terms.
“This performance was 3.39 per cent higher when compared to the third quarter of 2019 which recorded an aggregate of N37,806,924.41 million.
“This rate was, however, lower relative to growth recorded in the third quarter of 2019 by –9.91 per cent points but higher than the preceding quarter by 6.19 per cent points.”
In the overview, the NBS said the average daily oil production recorded in the third quarter of 2020 stood at 1.67 million barrels per day (mbpd), or 0.37mbpd lower than the average production recorded in the same quarter of 2019 and 0.14mbpd lower than production volume recorded in the second quarter of 2020.
It said that the real growth for the oil sector was –13.89 per cent (year-on-year) in Q3 2020, indicating a sharp contraction of –20.38 per cent points relative to the rate recorded in the corresponding quarter of 2019. Furthermore, real oil growth decreased by –7.26 per cent points when compared with oil sector growth recorded in Q2 2020 (6.63 per cent).
NBS said quarter on quarter, however, the oil sector recorded a growth rate of 9.64 per cent in Q3 2020. The sector contributed 8.73 per cent to total real GDP in Q3 2020, down from 9.77 per cent and 8.93 per cent respectively recorded in the corresponding period of 2019 and the preceding quarter, Q2 2020.
On the non-crude oil sector, the report said “the non-oil sector grew by –2.51 per cent in real terms during the reference quarter, which is –4.36 per cent points lower than the rate recorded in Q3 2019 but 3.54 per cent points higher than in the second quarter of 2020.”
The report said the non-oil sector was driven mainly by Information and Communication (Telecommunications), with other drivers being Agriculture (Crop Production), Construction, Financial and Insurance (Financial Institutions), and Public Administration.
In real terms, according to the report, the non-oil sector contributed 91.27 per cent to the nation’s GDP in the third quarter of 2020, higher than its share in the third quarter of 2019 (90.23 per cent) and the second quarter of 2020 (91.07 per cent).
Nigeria had, earlier in 2016 slipped into recession but was able to recover in the second quarter of the following year when it posted a 0.7 per cent growth.
In June, the World Bank warned that Nigeria faced its worst recession in four decades after revising its 2020 forecast for Nigeria’s economy to -4.1 per cent from its previous projection of -3.2 per cent.
The World Bank had projected that the collapse in oil prices coupled with the COVID-19 pandemic would plunge the Nigerian economy into a severe economic recession, the worst since the 1980s.
In a report, ”Nigeria In Times of COVID-19: Laying Foundations for a Strong Recovery,” the organisation estimated that Nigeria’s economy would likely contract by 3.2% in 2020.
The projection assumed that the spread of COVID-19 in Nigeria would be contained by the third quarter of 2020.
It feared that if the spread of the virus became more severe, the economy could contract further. Before COVID-19, the Nigerian economy was expected to grow by 2.1% in 2020, which means that the pandemic has led to a reduction in growth by more than five percentage points.
Shubham Chaudhuri, World Bank Country Director for Nigeria had said at the time that: ”While the long-term economic impact of the global pandemic is uncertain, the effectiveness of the government’s response is important to determine the speed, quality, and sustainability of Nigeria’s economic recovery. Besides immediate efforts to contain the spread of COVID-19 and stimulate the economy, it will be even more urgent to address bottlenecks that hinder the productivity of the economy and job creation.”
Marco Hernandez, World Bank Lead Economist for Nigeria and co-author of the report said: ”The unprecedented crisis requires an equally unprecedented policy response from the entire Nigerian public sector, in collaboration with the private sector, to save lives, protect livelihoods, and lay the foundation for a strong economic recovery.”