COVID-19, Poor Economic Policy Plunge Nigeria Into Second Economic Recession in Four Years

Poor economic policy amid COVID-19 pandemic has plunged Nigeria into second economic recession in four years, according to the latest report from the Nigerian Bureau of Statistics (NBS).

Africa’s largest economy contracted by 3.62 percent year-on-year in real terms in the third quarter of 2020, this was 2.48 percent better than the second quarter.

Nigeria’s economy shrinks by 6.10 percent in the second quarter, bringing its cumulative decline in the last two quarters to 9.72 percent, the worst of such contraction since 1987.

After two consecutive quarters of negative growth, Nigeria officially plunged into the second economic recession in four years in the third quarter of 2020.

A further breakdown revealed that the third-quarter growth rate was slower by 5.90 percent when compared to the 2.28 percent positive growth recorded in the same quarter of 2019.

NBS attributed the decline to COVID-19 lockdown and other measures put in place in the second quarter to contain the spread of COVID-19. This, the bureau said was evident in the numbers of economic activities that recorded positive (18) growth in the third quarter when compared to the second quarter (13).

“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. A total of 18 economic activities recorded positive growth in Q3 2020, compared to 13 activities in Q2 2020,” NBS stated.

During the third quarter, aggregate Gross Domestic Product (GDP) stood at N39,089,460.61 million in nominal terms. Representing an increase of 3.39 percent when compared with the N37,806,921.41 million recorded in the same period of 2019.

Oil Sector

In the third quarter, Nigeria’s daily crude oil production stood at 1.67 million barrels per day or 0.37mbpd lower than the same quarter of 2019 and 0.14mbpd lower than the production attained in the second quarter of 2020. Suggesting that OPEC and allies’ accord signed to artificially boost oil prices is having a negative impact on Nigeria’s output.

Therefore, the oil sector contracted by 13.89 percent year-on-year in the third quarter, representing a decline of 20.38 percent when compared with the same quarter of 2019.

Accordingly, real oil growth decreased by 7.26 percent in the quarter under review, down from 6.6 percent growth recorded in the second quarter of 2020.  However, on a quarterly basis, the sector expanded by 9.64 percent in the third quarter of 2020. Contributing 8.79 percent to total GDP, down from 9.77 percent recorded in the corresponding period of 2019 and 8.93 percent in the preceding quarter.

Non-Oil Sector

As expected, the non-oil sector performed better in the third quarter. Contracting by 2.51 percent in real time, a decline of 4.36 percent from the same quarter of 2019 and 3.54 percent better than the second quarter of 2020. The sector was driven mainly by the Information and Communication (Telecommunications) sector, with other drivers being Agriculture (Crop Production), Construction, Financial and Insurance (Financial Institutions), and Public Administration.

The non-oil sector contributed 91.27 percent to the nation’s GDP in the third quarter of 2020, higher than the 90.23 percent posted in the corresponding quarter of 2019 and 91.07 percent in the second quarter of 2020.