Following a negative growth of 3.62 per cent in the third quarter (Q3) of 2020 and the economy’s relapse into a recession at the weekend, Nigeria’s recovery appears like a tough challenge.
Nigeria recorded its worst recession as its Gross Domestic Product (GDP) in real terms declined by -3.62 per cent year-on-year (y/y) in the third quarter of 2020. The contraction marked the beginning of a full-blown recession and second consecutive contraction from -6.10 per cent recorded in the previous quarter of this year.
According to the third quarter GDP report released by the National Bureau of Statistics (NBS), oil GDP contracted by -13.89 per cent from -6.63 per cent in the second quarter of this year and 6.49 per cent in Q3 2019. The country’s non-Oil GDP contracted -2.51 per cent from -6.05 per cent in Second quarter (Q2) of 2020 and 1.85 per cent in Q3 2019, an indication that the COVID-19 pandemic continued to hammer business activities despite the lifting of restrictions.
The news of another recession also had a ripple effect on the nation’s equities market as its All Share Index (ASI) dipped by 0.04 per cent to close at 34,121.78 points, while investors lost a whopping N479 billion as market capitalisation closed at N17.829 trillion at the close of business yesterday.
Commenting on the development, analysts told Daily Sun in an emailed note, that the outlook for economic growth looks frail as the fight for recovery is expected to lose steam in the fourth quarter (Q4-20).
They further expressed optimism that the oil sector will continue its negative growth trend on expectations of Nigeria’s continued compliance with the OPEC+ production cut agreement.
Senior Research analyst, Gbolahan Ologunro, and Research analyst , Abdulazeez Kuranga, both at Cordros Capital, noted that the data from the OPEC’s Monthly Oil Market Report (MOMR) shows Nigeria produced 1.49mb/d of crude oil (excluding condensates) in October compared to 1.44mb/d in September.
They said, “As such, we see limited upside for higher crude oil production. In conjunction with the high base of Q4-19, we now expect crude oil production inclusive of condensates to print 1.71 mb/d translating to a negative growth estimate of 15.00 per cent y/y.
For the non-oil sector, we expect growth to remain in the negative region, albeit at a larger decline compared to Q3-20, following the social unrest and curfews that emanated from the #ENDSARS protests across the country. This in addition to pre-existing macro challenges in the broad economy should undermine activities in this space.
As such, we project the non-oil sector to decline by 4.87 per cent y/y”.