Nigerian economy is officially in recession, govt confirms

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.

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