Nigeria’s economy further receded in the third quarter, with a 2.24 per cent contraction in Gross Domestic Product (GDP), while real GDP expanded for the second consecutive quarter, the National Bureau of Statistics (NBS) said yesterday.
According to latest data, real GDP, unadjusted for seasonality increased by 8.99 percent quarter on quarter, which was an improvement compared with 0.89 per cent expansion in real GDP in the second quarter of the year. Real GDP had slowed by 13.71 per cent in the first quarter of the year.
The Nigerian economy slid into recession for the first time in 25 years in the second quarter, when a slump in crude prices which is a major contributor to government revenue brought about a 2.06 per cent contraction in the economy.
NBS noted that during the three month period, Nigeria’s oil production as reported by the Nigeria National Petroleum Corporation (NNPC) averaged at 1.63million barrels per day (mbpd), lower from production in second quarter of 2016. Oil production was also lower relative to the corresponding quarter in 2015 by 0.54million barrels per day when output was recorded at 2.17mbpd
As a result, real growth of the oil sector slowed by 22.01 per cent (year-on-year) in third quarter of 2016, representing a decline relative to growth recorded in same quarter of 2015 at 1.06 per cent. Growth declined by 23.07 per cent points and 4.54 percentage points relative to growth in third quarter of 2015 and second quarter of 2016 respectively. Quarter-on-Quarter, growth was 8.07 per cent.
A senior Moody’s analyst told Reuters that Nigeria’s economy could expand by 2.5 percent next year as long it can produce 2.2 million barrels per day – the level at which the government made its budget calculations.
The 2.24 per cent GDP recorded in the third quarter was lower by 0.18 per cent points from growth recorded in the preceding quarter and also lower by 5.08 per cent points from growth recorded in the corresponding quarter of 2015.
With the latest GDP contraction, analysts say it would be difficult for the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) which is holding its meeting to justify an increase in interest rate. They noted that the rising inflation rate will also make interest rate cut a difficult policy option. Inflation had risen from 17.9 per cent in September to 18.3 per cent in October and is expected to continue to rise.
Government revenue has plunged with the decline of oil prices, the country’s main export, since mid-2014, and production fell as militants in the Niger River delta blew up pipelines. The authorities have struggled to manage the economic fallout, at one point pegging the exchange rate against the dollar for more than a year and more recently using law enforcement to bring down the street price of foreign currency.
To Michael Famoroti, an economist at Vetiva Capital Management, the third-quarter data is worrisome because “it was expected that the liberalization of the petroleum sector and foreign-exchange market would have helped. We didn’t see that. It means the monetary and fiscal authorities will have to step up their efforts to address the output decline.”