The Nigerian economy is in recession, figures released by the National Bureau of Statistics officially confirmed Wednesday.
Although various government officials, notably the Central Bank of Nigeria (CBN), Godwin Emefiele, and the Minister of Finance, Kemi Adeosun, had over a month ago said the economy was in “technical” recession, the official confirmation came with the release of the new figures.
The statistics bureau said the second quarter 2016 Gross Domestic Product (GDP) declined by -2.06 per cent.
Annual inflation rose to 17.1 percent in July from 16.5 percent in June, and food inflation rose to 15.8 percent from 15.3.
“The pace of the increase in the headline index was however weighed upon by a slower increase in three divisions, namely health, transport, and recreation and culture divisions,” the NBS said.
The statistics agency said the onset of the harvest season was yet to significantly impact on food prices, with food sub-index rising by 15.8 per cent (year-on-year basis) in July, about 0.5 per cent points lower from rates recorded the previous month.
Equally, the agency said energy prices accounted for the rise in inflation for the month, with energy and energy related prices recording some of the largest increases reflected in the core sub-index.
“In July, the core sub-index increased by 16.9% during the month, up by 0.7% points from rates recorded in June (16.2%).” the report said.
“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.
Despite the figures confirming Nigeria’s worst economic recession in over a decade, the federal government on Wednesday said it remained optimistic of a turnaround.
In a reaction, the Presidency said although the gross domestic product (GDP) figures released by the NBS in its 2016 second quarter confirmed a temporary decline in the economy, it also indicated “an hopeful expectation in the country’s economic trajectory.”
A statement from the office of the Vice President, Yemi Osinbajo, said beside the growth in the agriculture and solid mineral sectors, the Nigerian economy was doing better than estimates by the International Monetary Fund (IMF).
The Vice President said with the present administration’s policies, there were clear indications the second half of the year would be even much better.
“The Buhari presidency will continue to work diligently on the economy and engage with all stakeholders to ensure that beneficial policy initiatives are actively pursued and the dividends delivered to the Nigerian people,” he said.
In his reaction to the NBS report, Special Adviser to the President on Economic Matters, Adeyemi Dipeolu said “The just recently released data from the National Bureau of Statistics showed that Gross Domestic Product declined by -2.06% in the second quarter of 2016 on a year-on-year basis.
“A close look at the data shows that this outcome was mostly due to a sharp contraction in the oil sector, due to huge losses of crude oil production as a result of vandalisation and sabotage.
“However, the rest of the Q2 data is beginning to tell a different story. There was growth in the agricultural and solid minerals sectors, which are the areas in which the Federal Government has placed particular priority.”
Mr.Dipeolu noted, agriculture grew by 4.53 per cent in the second quarter of 2016, compared with 3.09 per cent in the first quarter.
Besides, he said the metal ores sector showed similar performance, with coal mining, quarrying and other minerals also showing positive growth of over 2.5 per cent, while the share of investments in GDP increased to its highest levels since 2010, growing to about 17 per cent of GDP.
Although the manufacturing sector was yet truly out of the woods, the adviser said the sector was beginning to show signs of recovery, with the service sector similar improvement.
The inflation rate remains high but the good news is that the month-on-month rate of increase has fallen continuously over the past three months.
He noted the high unemployment rate, which she said was usually the case during growth slowdowns.
“The emerging picture, barring unforeseen shocks, is the areas given priority by the Federal Government, are beginning to respond with understandable time lags to policy initiatives,” Mr. Dipeolu said.
“Indeed, as the emphasis on capital expenditure begins to yield results and the investment/GDP numbers increase, the growth rate of the Nigerian economy is likely to improve further,” he said
As these trends continue, he said the outlook for the rest of the year pointed at the Nigerian economy beating the IMF prediction of -1.8% for the full year 2016.
“The IMF had forecasted a growth of -1.8% for 2016. However, the economy is performing better than the IMF estimates so far. For the half year, it stands at -1.23% compared to an average of -1.80% expected on average by the IMF.”
A Research Analyst with FXTM, Lukman Otunuga, noted the 2.06 per cent contraction of the economy in the second quarter, saying the signs of an imminent slowdown were already visible with the Central Bank of Nigeria (CBN)’s foreign reserves falling to $19 billion.
“While Naira’s vulnerability was highly expected following the official floating foreign exchange policy, external risks, such as a resurgent dollar has accelerated the devaluation of the local currency, consequently pressuring the nation further.
“With inflation and unemployment hovering around worrying levels, the CBN has been placed under immense pressure to act, which may weigh on investor sentiment.
“While the news of Nigeria entering a recession may be painful, it should be no surprise as the incessant declines in oil prices have punished heavily oil export nations, with Nigeria being no exception,” Mr Otunuga said.