It’s Official! Nigeria’s Economy In Recession


Finally, Nigeria has slipped into recession, with the latest growth figures released yesterday, showing the economy contracted 2.06 percent in the second quarter of 2016. The country has now seen two consecutive quarters of declining growth, the usual definition of recession.

President Muhammadu Buhari

The National Bureau of Statistics (NBS), which disclosed this in a report, also stated that Consumer Price Index (CPI) increased to 17.1 per cent in July from 16.5 per cent in June.

Besides, it put the value of share capital imported by different sectors of the economy at $202.70 million during the period under review. Nigeria’s vital oil industry has been hit by weaker global prices, but the government said there has been strong growth in other sectors. Crude oil sales account for 70 per cent of government’s income.

The price of oil has fallen from highs of about $112 a barrel in 2014 to below $50 at the moment. Similarly, the fall in the Nigerian currency, the naira, has hurt the economy.

It was allowed to float freely in June to help kick-start the economy, but critics argued it should have been done earlier. The report stated that the 2.06 per cent contraction in the nation’s economy was lower by 1.70 per cent points from the negative growth rate of 0.36 per cent recorded in the preceding quarter.

It stated that it was also lower by 4.41 per cent points from the growth rate of 2.35 per cent recorded in the corresponding quarter of 2015. “Quarter on quarter, real GDP increased by 0.82 per cent during the quarter, nominal GDP was N23, 483,954.78 million (in nominal terms) at basic prices.

“This was 2.73 per cent higher than the second quarter 2015 value of N22, 859,153.01 million. This growth was lower than the rate recorded in the second quarter of 2015 by 2.44 per cent points.

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“The Nigerian economy can be more clearly understood according to the oil and non-oil sector classifications,” NBS stated. The report said that during the period under review, oil production was estimated at 1.69 million barrels per day (mbpd), 0.42 million barrels per day lower from production in first quarter of 2016.

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It said that oil production was also lower relative to the corresponding quarter in 2015 by 0.36 million barrels per day when output was recorded at 2.05mbp.

The report noted that growth in the non-oil sector was largely driven by the activities in seven areas of the economy. It listed the seven areas as agriculture, information and communication, water supply, arts entertainment and recreation, professional scientific and technical services, education and other services.

According to the report, the areas have grown positively while the remaining 19 major sectors, many of which are substantially indirectly dependent on the oil sector, have recorded negative growth.

“The non-oil sector accordingly declined by 0.38 per cent in real terms in the second quarter of 2016. “This growth rate was 0.20 per cent points lower than the first quarter of 2016 (-0.18 per cent), and 3.84 per cent points lower from the corresponding quarter in 2015 (3.46 per cent).

“In real terms, the nonoil sector contributed 91.74 per cent to the nation’s GDP, higher from shares recorded in the first quarter of 2016 (89.71 per cent) and the second quarter of 2015 (90.20 per cent),” the report stated. In a related development, the CPI, which measured inflation, was 0.6 per cent points higher from the points recorded in June.

The report noted that increases were recorded in all `COICOP divisions, which contributed to the Headline index reflecting higher prices across the economy.

“The pace of the increase in the headline index was, however, weighed upon by a slower increase in three divisions; health, transport, and recreation and culture divisions.

“The onset of the harvest season is yet to have a significant impact on food prices. It is yet to have a significant impact as the Food Sub-index increased by 15.8 per cent (year-onyear) in July, 0.5 per cent points lower from rates recorded in June.

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“Prices, however, increased at a slower pace across a few groups within the Food sub-index namely milk, cheese and eggs; oils and fats; and fruits,” it said.

The report added that imported foods, as reflected by the Imported Food Sub-index, increased by 0.4 per cent points from June to 20.5 per cent in July.

It stated that energy and energy-related prices continued to be the largest increases reflected in the Core sub-index. “In July, the Core subindex increased by 16.9 per cent during the month, up by 0.7 per cent points from rates recorded in June (16.2 per cent).

“During the month, the highest increases were seen in the electricity, liquid fuel (kerosene), solid fuels, and fuels and lubricants for personal transport equipment groups.

“Month-on-month, the Headline index increased albeit, at a slower pace for the second consecutive month in July. “The index increased by 1.3 per cent in July, 0.4 per cent points from 1.7 per cent recorded in June,” the report stated.

Meanwhile, the population of those within the working age population willing, able and actively looking for work increased from 78.5 million in Q1 2016 to 79.9 million, representing an increase of 1.78 per cent in the labour force.

The report stated that the total number of persons in full-time employment (did any form of work for at least 40 hours) decreased by 351,350 or 0.65 per cent when compared to the previous quarter, and also decreased by 749,414 or 1.38 per cent when compared to Q2 of 2015.

“With an economically active or working age population of 106.69 million and labour force population of 79.9 million, it means 26.8 million persons within the economically active or working age population decided not to work for one reason or the other in Q2 2016, hence were not part of the labour force and cannot be considered unemployed.

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“This indicates that more people who previously were not economically engaged are now deciding to look for work. This may be connected to the decline in economic activity, which is forcing previous housewives, retirees and students to enter the job market to make ends meet.

A single income may no longer be enough for a family; prompting previously out-of-work housewives to look for work to support strained household income.

“Also students may be choosing to drop out of school or postpone further studies in order to enter the job market to make ends meet or to raise fees for further education,” said the report.

Also, the $202.70 million share capital imported by different sectors of the economy represents a 16.77 per cent decline against 84.17 per cent recorded in 2015.

“Capital is either imported in the form of shares, or directly imported by different sectors of the economy. “In the second quarter of 2016, the value of share capital imported was estimated to be $202.70 million, which as for capital importation as a whole, sets the record for the lowest value for the second consecutive quarter.

“The figure represents a decline of 16.77 per cent relative to the previous quarter, and a decline of 84.17 per cent relative to the same quarter of 2015,” the report.

The report noted that this was a smaller yearon- year decline than in the previous quarter, in which it was 87.41 per cent. The share capital accounted for 31.32 per cent of total capital imported, less than half its share in the second quarter of 2015 of 70.41 per cent and the lowest level in seven years.

Source –The Telegraph


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