Nigeria unexpectedly exits recession

THURSDAY heralded good news for Nigeria’s economy as it came out of a recession in the fourth quarter apparently due to the easing of Covid-19 restrictions.

The National Bureau of Statistics (NBC) announced on its website that the GDP grew 0.11% in the three months through December from last year’s, compared with the third quarter’s 3.6% decline.

According to the report, the growth was largely driven by positive growth recorded in the information and communication sector (15.9%) and agriculture (3.42%).

NBC stated that the oil sector plunged by 19.76% (year-on-year) in real terms as against a contraction of 13.89% recorded in Q3 2020.

The non-oil sector on the other hand grew by 1.69% in real terms, an improvement compared to the contraction of 2.51% recorded in Q3 2020. It however was slower than 2.26% recorded in the corresponding period of 2019.

The report explained that the service sector contributed 54.28% to the GDP in Q4 2020, followed by agriculture, which contributed 26.95%, and industries with 18.77%. Non-oil accounted for 94.13% while the oil sector accounted for 5.87% of the total GDP for Q4 2020.

The crash in global crude oil prices, which was triggered by the oil price war between Saudi Arabia and Russia, is responsible for the decline in the oil sector activity.

According to International Monetary Fund data, the economy contracted up to 1.92% for the full year for the first time since 1991.

This unexpected rebound indicates that the economy may recover faster than expected considering the oil price and output increase this year.

A senior analyst at SBM Intelligence in Lagos, Joachim MacEbong, also opines that it could also point to the growing dominance of the non-crude sector, according to Bloomberg.

This is evident in the fact that crude oil accounts for nearly all foreign-exchange earnings and half of government revenue in Africa’s biggest producer of the commodity, though it contributes less than 10% to the country’s GDP. Oil production fell to 1.56 million barrels a day in the fourth quarter from 1.67 million barrels in the previous three months.

Nigeria’s forecast for growth of 3% in 2021 is double the IMF’s.

A stronger recovery could enable the CBN handle the currency instability, which means the monetary policy committee could start raising interest rates again to fight inflation currently above the of 6% to 9% target for more than five years. In 2020, the panel eased by 200 basis points.