A broken Nigeria enters recession

A broken Nigeria enters recession

The National Bureau of Statistics (NBS) this week released the macro economic indices for the second quarter of 2016 to the bemusement of Nigerians and even the NBS itself as all key economic indices pointed to an economy is decline in all sectors. The Capital inflow, employment/unemployment rates, Gross Domestic Product and Inflation all turned out terribly negative and in the words of NBS, worse than expected. The nations GDP at constant basic prices shrunk in the second quarter of 2016 by 2.06% after it contracted 0.36 per cent in the first quarter of 2016. While most analysts and economists had already classified the economy as in a recession before the release of these figures, very few of them and economists expected the economy to contract to this disturbing low level.

The fall of crude oil prices has reduced drastically the government’s ability to spend and affected adversely the value of the Naira causing a severe shortage in foreign exchange required to keep the economy healthy. Revenues from crude oil sales still account for over 70% of governments revenue and the attacks by Niger Delta militants on oil installations has compounded an already bad situation for the nation’s economy. The government in the 2016 budget expected to generate revenue from the sale of 2.2 million barrels of crude oil daily, but the attacks on Oil installations have reduced daily output by over 700,000 barrels to 1.56 million barrels daily. The NBS yesterday said the inflation rate has risen to a 10 year high of 17.1% in July from 16.5% in June. Inflation on food items also rose to 15.8% in July from June figures of 15.3%. Nigeria’s Sovereign dollar bonds also experienced a downward spiral to its lowest value in weeks after the second quarter economic data was released by the NBS.

The oil sector appears to be the worst hit as the NBS figures shows a year-on-year contraction of -17.5% as against -1.9 percent in the first quarter of this year. The figures really paint a depressing reality of the nation’s economy as the non-oil sector also contracted year-on-year by -0.4% in compared to a -0.2% contraction in the first quarter of 2016. The Manufacturing sector was greatly affected as well. The Bureau of Statistics figures show a contraction of -3.4% for the second quarter of 2016 in relation to -7.0% contraction in the first quarter of the year. Power shortages experienced by manufacturers as well as their inability to get foreign exchange to import raw material ingredients was largely responsible for the continuous contraction of economic activities in this sector. But the Presidency in their characteristic manner urged Nigerians not to be scared about the sharp drop in GDP figures, assuring that the economic recession will not persist without stating how they intend to stop this recession.

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