How Soon Will Economy Exit Recession?
The federal government has repeatedly assured that the current economic downturn will be transient, but experts remained cautious, especially as the threat posed by COVID-19 subsists, writes James Emejo
It was a crisis foretold. Several international organisations including The World Bank and International Monetary Fund (IMF) as well as global rating institutions had predicted that Nigeria would relapse into a second economic recession by the third quarter of the year. Their pessimism had resulted largely from concerns over the country’s somewhat unimpressive macroeconomic credentials, which had failed empirical analysis.
With high rate of inflation, which stood at 14.23 per cent as at October, well over the Monetary Policy Rate (MPR) at 11.5 per cent, rising unemployment rate presently at over 27.1 per cent, as well as volatility in global crude oil prices and the resultant effects on foreign reserves and foreign exchange, and dearth of foreign investments and a largely undiversified economic base among other things, it was crystal clear that an economic downturn was imminent.
The entire scenario had been compounded by the spread of the COVID-19 pandemic, which continued to wreak havoc on world economies, reversing growth projections and distorting socioeconomic life.
Nigeria’s economic travail was also severally echoed by the current administration, which had already resorted to external borrowing to absorb the emerging shocks.
President Muhammadu Buhari, while laying the 2021 Appropriation before the joint session of the National Assembly, had warned that the country risked a second recession by December and urged the legislature to hasten the passage of the budget, which is expected to aid recovery.
However, confirming the obvious, the National Bureau of Statistics (NBS) last week published the Q3 growth estimates which showed that Nigeria’s real Gross Domestic Product (GDP) contracted for the second consecutive quarter by 3.62 per cent compared to a growth of -6.10 per cent in Q2- ushering the country into its second recession in five years since the first in 2016.
According to the Nigerian Gross Domestic Product Report (Q3 2020), cumulative GDP for the first nine months of the year (January-September), also indicated a growth of -2.48 per cent.
The NBS said the performance 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.
During the review quarter, aggregate GDP stood at N39.09 trillion in nominal terms compared to N34.34 trillion in Q2 while real GDP stood N17.82 trillion compared to N15.89 trillion in the preceding quarter.
Growth in Q 3 was boosted by then on-oil sector, which contributed 91.27 per cent to growth in real terms in Q3, higher than the 91.07 per cent in Q2 and 90.23 per cent in Q3 2019.
On the other hand, the oil sector contributed 8.73 per cent to total real GDP in Q3, down from 8.93 per cent in Q2.
Real growth of the oil sector contracted to 13.89 per cent (year-on-year) in Q3, indicating a sharp contraction of 20.38 per cent relative to the rate recorded in Q3 2019.
The average daily oil production stood at 1.67 million barrels per day (mbpd), or 0.14mbpd lower than production volume in Q2 and 0.37mbpd lower than Q3 2019.
In real terms, agriculture contributed 30.77 per cent to overall GDP, higher
than the 24.65 per cent in the preceding quarter and 29.25 per cent in Q3 2019.
The manufacturing sector contribution to growth stood at 8.93 per cent, compared to 8.82 per cent in Q2 and 8.74 per cent in Q3 2019.
Trade also contributed 13.88 per cent to GDP, lower than the 14.28 per cent posted in the preceding quarter.
The NBS, however, noted that as the C OVID -19 restrictions were lifted, “businesses re-opened and international travel and trading activities resumed, some economic activities have returned to positive growth.”
It added that a total of 18 economic activities recorded positive growth in Q3 compared to 13 activities in the preceding quarter.
However, the federal government has continued to allay fears that the downturn in the economy may last for a longer period thereby aggravating the sufferings of Nigerians.
The Minister of Finance, Budget and National Planning, Mrs. ZainabAhmed, said the economy remained on the path of recovery despite the 3.62 per cent contraction in the third quarter of the year, assuring that the technical recession induced by the COVID-19 pandemic, will be short-lived.
She hinged her optimism on the Q3 performance which bettered the preceding though a contraction was posted in both.
According to her, the improvement nevertheless showed that government’s responses to the pandemic have had positive outcomes when compared with the 6.10 per cent contraction in Q2. She noted that the economy had been on the path of recovery and growth before COVID-19 set in and eroded almost all its gains.
In her opening remarks at the ongoing 26th Nigerian Economic Summit (#NES26), themed:” Building Partnerships for Resilience” in Abuja, the minister, however, assured that the country will likely exit the current recession as soon as the first quarter of 2021, adding that the federal government will aggressively implement the Nigerian Economic Sustainability Plan (NESP) launched to boost economic recovery amidst the impact of the COVID-19 pandemic.