The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, on Monday said, the country would overcome the recession in the 4th quarter of this year or by the first quarter of 2021 with the economic measures being implemented by the Federal Government. Speaking at the 26th Nigerian Economic Summit organised by the Nigerian
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, on Monday said, the country would overcome the recession in the 4th quarter of this year or by the first quarter of 2021 with the economic measures being implemented by the Federal Government.
Speaking at the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Ministry of Finance, Budget, and National Planning, Ahmed said it was expected as the COVID-19-induced recession followed the pattern across the world where many countries also entered economic recessions.
Nigeria officially slipped into a recession after the country’s GDP contracted for the second consecutive quarter, just three years after emerging from the economic rubbles of 2017.
According to the National Bureau of Statistics (NBS), the GDP dropped by 3.62 per cent in Q3 and 6.10 per cent in Q2.
The Finance Minister noted that other countries that went into recession like the United Kingdom, the United States and Spain recorded much deeper contraction than that of Nigeria.
“Let me remind us that before the impact of COVID-19, the Nigerian economy was experiencing sustained growth, which had been improving quarter by quarter until the second quarter of 2020, when the impact of the COVID-19 was felt.
“Nigeria is not alone in this, but I will say that Nigeria has outperformed all of these economies in terms of the record of a negative growth,” she said.
She said that South Africa, which recorded a decline of -50 per cent compared to Nigeria’s -6.1 per cent in Q2, will also record a deeper negative growth in Q3.
Ahmed said, “While the economy has entered into recession in the third quarter, the trend of the growth suggests that this will be a short-lived recession, and indeed by the fourth or, at worst, the first quarter of 2021, the country will exit recession.
“Our expectation of a quick exit, which will be historically fast, is anchored on the several complementary fiscal, real sector and monetary interventions that have been proactively introduced by government to forestall a far worse decline of the economy and alleviate the negative consequences of the pandemic.”
The economic recession in Nigeria is the worst in over three decades when the GDP shrank by 10.8 percent in 1987.
The last time the nation witnessed recession was in 2016 before exiting it a year after.
Also echoing the Finance Minister’s fears, the Lagos Chamber of Commerce and Industry (LCCI), at the weekend said Africa’s largest economy is unlikely to come out of recession this year.
Director-General, LCCI, Dr. Muda Yusuf, said Nigeria’s economic “recession could linger all through the fourth quarter of this year.”
He noted that the recent devastation caused by the #End SARS crisis could make the recession persist further, stating that the crisis has dampened enthusiasm among investors.
Yusuf noted that the news of the recession did not come as a surprise.
He stated that the economic contraction was 3.62 per cent in the third quarter as against 6.1 per cent in second quarter.
He, however, noted that with these numbers, we could possibly say that the worst was over as the contraction in the third quarter was much less than what was experienced in the second quarter.
“Regrettably, the #EnSARS crisis may perpetuate the recession into the fourth quarter. The protests and the destruction that followed was a major setback for our economic recovery prospects,” he stated.
The LCCI boss added: “From an economic perspective, 2020 has been a very bad year, the worst in recent history. We are faced with the double jeopardy of a stumbling economy and spiralling inflation.
“The October inflation numbers of 14.23 per cent was the highest in 10 months. In economic parlance, this condition is characterised as stagflation. The effects of these developments are evident in business and in households.”
Yusuf observed that sales were slowing, profit margins were being eroded, production costs escalating, unemployment rising, poverty situation worsening, purchasing power weakening, and a general social discontent.
“Regrettably, and as if these were not bad enough, the business community continues to grapple with unfavourable policy, institutional and regulatory challenges impeding investment,” he said.
To facilitate quick recovery, the LCCI DG said the country should restore normalcy to the foreign exchange market by broadening the scope of market expression in the allocation mechanism.
He explained that the ports system, especially the key institutions in the international trade processes, should be more investment-friendly, as trade was critical to recovery.
Yusuf said: “We should show greater commitment to the fixing of the structural issues to reduce production and operating costs for investors in the economy.
“Following the #EndSARS experience, the state of internal security is beginning to impact negatively on investors’ confidence. Security presence is becoming less visible, especially in the major cities.
“The psychological effects could adversely affect investment and economic recovery. We appreciate the setback suffered by the Police as a result of the recent protests and we empathise with them. But, we need to give security confidence to citizens and investors.”
He stated that incidents of kidnapping, banditry, herders-farmers clashes had not abated, stressing that these also had grave implications for investments
The LCCI chief, however, expressed hope that the economy would resume to the path of growth in the first or second quarter of 2021, barring any new disruptions to the economy.
Nigeria’s gross domestic product (GDP) recorded a growth rate of –3.62% (year-on-year) in real terms in the third quarter of 2020.
The National Bureau of Statistics (NBS) made the disclosure in its GDP Report for Q3 2020 released on Saturday.
The bureau said cumulatively, the economy has contracted by –2.48%.
“While this represents an improvement of 2.48% points over the –6.10% growth rate recorded in the preceding quarter (Q2 2020), it also indicates that two consecutive quarters of negative growth have been recorded in 2020,” the NBS report said.
“Furthermore, growth in Q3 2020 was slower by 5.90% points when compared to the third quarter of 2019 which recorded a real growth rate of 2.28% year on year.”
The NBS noted that the performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the COVID-19 pandemic.
“As these restrictions were lifted, businesses re-opened and international travel and trading activities resumed, some economic activities have returned to positive growth,” it said.
“A total of 18 economic activities recorded positive growth in Q3 2020, compared to 13 activities in Q2 2020.
“During the quarter under review, aggregate GDP stood at N39,089,460.61 million in nominal terms. This performance was 3.39% higher when compared to the third quarter of 2019 which recorded an aggregate of N37,806,924.41 million.
“This rate was, however, lower relative to growth recorded in the third quarter of 2019 by –9.91% points but higher than the proceeding quarter by 6.19% points.”
For clarity, the Nigerian economy was broadly classified into the oil and non-oil sectors.
Real growth for the oil sector was –13.89% (year-on-year) in Q3 2020, indicating a sharp contraction of –20.38% points relative to the rate recorded in the corresponding quarter of 2019.
“Furthermore, real oil growth decreased by –7.26% points when compared with oil sector growth recorded in Q2 2020 (6.63%),” the bureau disclosed.
“Quarter on quarter however, the oil sector recorded a growth rate of 9.64% in Q3 2020.
“The sector contributed 8.73% to total real GDP in Q3 2020, down from 9.77% and 8.93% respectively recorded in the corresponding period of 2019 and the preceding quarter, Q2 2020.”
The NBS said the non-oil sector grew by –2.51% in real terms during the reference quarter, which is –4.36% points lower than the rate recorded in Q3 2019 but 3.54% points higher than in the second quarter of 2020.
It further stated that the non-oil sector was driven mainly by Information and Communication (Telecommunications), with other drivers being Agriculture (Crop Production), Construction, Financial and Insurance (Financial Institutions), and Public Administration.
“In real terms, the non-oil sector contributed 91.27% to the nation’s GDP in the third quarter of 2020, higher than its share in the third quarter of 2019 (90.23%) and the second quarter of 2020 (91.07%),” the NBS added.
The contraction means Nigeria’s economy has slipped into recession for the first time since 2016 following a negative economic growth for the second consecutive quarter.
Economists consider two consecutive quarters of contracting GDP as the technical definition of a recession.