Africa’s biggest economy officially slid into recession for the first time in more than 20 years as the statistics office announced a further contraction in the second quarter of the year.
The Nigerian Bureau of Statistics said on Wednesday that gross domestic product contracted by 2.06 percent after shrinking 0.36 percent in the first quarter.
Nigeria’s non-oil sector also declined by 0.38 percent, and analysts stressed that the country’s problems are broader than oil.
“More important than the headline number is the fact that almost all key sectors of the economy are now struggling,” John Ashbourne, Africa economist at London-based Capital Economics, said in a note distributed Wednesday.
Many declines, apart from the oil sector, were due to Nigerian government policy, Ashbourne said.
Ashbourne also cited import restrictions that have harmed manufacturing and foreign exchange policies that have discouraged investment.
The statistics bureau said the $647.1 million of capital imported into Nigeria during the second quarter “would be the lowest level of capital imported into the economy on record.”
Ashbourne said the economy likely will “continue to shrink” this year.
Still, the slump in crude prices, Nigeria’s mainstay, has hammered public finances and the naira currency. Crude sales account for around 70 percent of government revenues.
Attacks by militants on oil and gas facilities in the Niger Delta hub also have cut production by about 700,000 barrels per day to 1.56 million barrels per day. The government’s 2016 budget assumed 2.2 million barrels per day.
On Wednesday, the statistics office said annual inflation reached 17.1 percent in July from 16.5 percent in June — a more than 10-year high — and food inflation rose to 15.8 percent from 15.3.
Nigeria’s sovereign dollar bonds fell across the curve to their lowest value in more than two weeks after the statistics bureau released its data.
“The Nigerian economy contracted more deeply than we had expected in the second quarter,” said Razia Khan, chief economist, Africa at Standard Chartered bank.
The statistics bureau figures showed Nigeria attracted just $647.1 million of capital in the second quarter, a 76 percent fall year-on-year and 9 percent down from the first quarter.
Nigeria’s economy was last in recession, for less than a year, in 1991, data shows. It also experienced a prolonged recession from 1982 until 1984.
President Muhammadu Buhari was in power for some of that period as a military ruler after seizing power in a December 1983 coup and remained head of state until the military pushed him out in August 1985.
The office of the vice president, who oversees economic policy, said in a statement it expected a “better economic outlook” for the second half of 2016 “because many of the challenges faced in the first half either no longer exist or have eased.”
Niger Delta Avengers, the group claiming responsibility for most of the attacks in the oil-producing region in the last few months, said on Monday it had ceased hostilities.
Adeyemi Dipeolu, a presidential economic advisor, attributed the recession largely to a “sharp contraction in the oil sector” caused by the militant attacks.
By: Reuters.
Photo: Business Daily Africa.
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
For The #FacebookTeam