Nigeria economy facing recession as GDP shrinks

Nigeria’s economy risks falling into recession after it shrank in the first quarter of 2016 as outputs in the manufacturing, financial, real estate, oil and gas fell significantly.

The nation’s Gross Domestic Product, which measures the output of an economy, contracted by 0.36 per cent from a year earlier, the National Bureau of Statistics said in an emailed statement on Friday.

This compares with a GDP growth rate of 2.11 per cent recorded in the last quarter of 2015.

The last time Nigeria recorded such a negative growth rate in GDP was in 1995 when it had a GDP grew by -0.3 per cent, according to World Bank statistics.

The NBS figures showed the GDP of -0.36 recorded in the first quarter of 2016 was lower by 2.47 percentage points from the growth recorded in the preceding quarter and also lower by 4.32 percentage points from the growth recorded in the corresponding quarter of 2015.

The report stated that almost all the sectors recorded a decline in output.

For instance, it said oil GDP slowed by -1.89 per cent, electricity and gas recorded -44.4 per cent, industries -5.49 per cent and manufacturing -7 per cent.

The report said, “In the first quarter of 2016, the nation’s Gross Domestic Product slowed by 0.36 per cent (year-on-year) in real terms.

“This was lower by 2.47 per cent points from growth recorded in the preceding quarter and also lower by 4.32 per cent points from growth recorded in the corresponding quarter of 2015. Quarter on quarter, real GDP slowed by 13.71 per cent.

“Mining and quarrying sectors slowed at 2.96 per cent (year-on-year) in Q1 2016, a relative improvement from Q1 2015 by 4.94 per cent.

“Nominal GDP growth of manufacturing in Q1 2016 slowed by 2.98 per cent (year-on-year), 4.23 per cent points lower from growth recorded in Q1 2015 and 9.91 per cent points lower from growth in Q4 2015 as a result of slower growth.”

A country is said to be in economic recession after experiencing negative growth for two consecutive quarters.

In the case of Nigeria, the country will be deemed to have entered recession if it records another negative growth in the second quarter.

“It’s inevitable that we’ll go into recession,” an analyst at Vetiva Capital Management Limited, Pabina Yinkere, told Bloomberg.

“I expect the second quarter to be even worse,” he added.

The Chief Executive Officer of Financial Derivatives Limited, Mr. Bismarck Rewane, said, “We have one more month to evade a recession, and that’s just not going to happen. Let’s not fool ourselves.

“We’ve had strikes, petrol queues, and disruption of oil production, all showing we’re headed for another negative quarter.”

The contraction “shows that Nigerians and particularly the central bank should now reconsider the tightening stance they have embarked upon,” the Chief Executive Officer of Economic Associates Limited, Dr. Ayo Teriba, said.

“It is now likely that Nigeria’s economy will contract over the year as a whole,” a London-based Africa economist at Capital Economics Limited, John Ashbourne, said in an emailed note to clients.

He added, “We have long warned of a slow-burning crisis in Nigeria. It now seems that this view was too optimistic: the country is headed into a full-blown crisis.”

Meanwhile, the NBS also on Friday released the Gross Domestic Product report and the labour statistics for the first quarter of 2016 with the country experiencing an increase in unemployment rate from 10.4 per cent in fourth quarter of 2015 to 12.1 per cent.

The country recorded an unemployment rate of 9.9 per cent in the third quarter of 2015 and 8.2 per cent in second quarter of 2015.

It said using the NBS previous methodology, unemployment rate would have been 31.2 per cent in Q1 2016, from 29.per cent in Q4 2015, 27.3 per cent in Q3 2015, 26.5 per cent in Q2 2015, 24.2 per cent Q1 2015, 23.9 per cent in 2011 and 21,4 per cent in 2010.

It said within the first quarter of 2016 period, the number of unemployed people in the labour force rose by about 1.5 million as against an increase of 518,000 between the third and fourth quarters of 2015.

It said, “The number of unemployed in the labour force, increased by 1,449,18 persons between Q4 2015 and Q1 2016 resulting in an increase in the unemployment rate to 12.1 per cent in Q1 2016 from 10.4 per cent in Q4 2015, 9.9 per cent in Q3 2015 and 8.2 per cent in Q2 2015.

“Nigeria was therefore unable to create the 1.5 million jobs required between Q4 2015 and Q1 2016 to keep the unemployment rate constant at 10.4 per cent in Q4 2015.

“Within the same period, the total number in full-time employment (did any form of work for at least 40 hours) decreased by 528,148 persons or 0.97 per cent.

“This consists of people who lost their jobs and were either forced or for various reasons chose to move from full-time employment to underemployment.”

Falling prices of crude, from which the nation derives up to 70 per cent of its revenues, have caused the nation’s economic outlook to deteriorate as the federal and state governments struggle to pay salaries and stimulate growth.

President Muhammadu Buhari has resisted calls from investors to devalue the naira, which has been pegged at 197-199 per dollar for more than a year.

Foreign-exchange trading restrictions and import curbs have led to shortages of goods from petroleum products to milk and contributed to the contraction in factory output in the quarter.

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