Nigerian Economy Slides into Second Recession within 5 years

Tuesday, November 24, 2020 / 01:50PM / PFI Capital/Header Image Credit: PFI Capital

Real GDP contracted by 3.62% in Third Quarter

The National Bureau of Statistics over the weekend released the much-awaited Gross Domestic Product (GDP) figures for Q3-2020. The report revealed that the economy contracted by 3.62% YoY indicating 2 consecutive quarters of negative growth rate and thus implying the economy is now officially in recession. The result however represents an improvement in the economy when compared to the 6.10% sharp decline in Q2-2020. Notably, a total of 18 economic activities across different sectors recorded growth in Q3-2020 when compared to 13 activities in Q2-2020. Some of the bright spot includes the information & Communication, Finance and Insurance, Agriculture, and construction sectors while sectors like manufacturing and transportation remained sluggish in the negative region.  The reports also show a slower 5.9% growth compared to the 2.28% in Q3-2019 as a result of the COVID-19 impact as restrictions to movement and economic activity was imposed with gradual easing in third quarter.

Oil GDP Plunges Further on Lower Oil Production

Following the COVID-19 induced shocked on the global oil market, Oil Sector GDP contracted by 13.89% YoY indicating a 20.38% lower relative to the rate recorded in 2019. Notably in the quarter, average daily oil production drop to 1.67mbpd indicating a 0.37mbpd and 0.14mbpd lower than same quarter of 2019 and Q3-2020 respectively. However, on a quarter on quarter basis, the sector recorded a growth of 9.64% compared to the second quarter of this year. There is also reduction in sectoral share of the GDP to 8.73% from 8.93% and 9.77% in Q3-2020 and Q2-2019 correspondingly.

The Non-Oil Sector Driven by growth in Resilient Sectors

A 2.51% contraction in real terms was recorded in the non-oil sector which represent a 4.36% below the Q3 2019 but 3.54% greater than what was recorded in Q2-2020. This was expected as major restrictions were only lifted in the third quarter with international airlines gradually resuming business activities. Like the second quarter output, the non-oil sector growth was mainly driven by the Information and communication subsector with support from Agriculture, construction, and financial institutions subsector. Interestingly, the contribution of the sector to the total GDP also improved from 91.07% to 91.27% and 90.23% in Q2-2020 and Q3-2019 respectively.

Previous Report from PFI Capital

1.      August PMI Shows Economic Activities Still in Contraction Amid Slow Recovery - PFI Capital

2.     Nigeria Nears Recession with 6.1% Contraction in Q2-2020 - PFI Capital

3.     Food Price Pressure Stokes Inflation to 28-month High in July - PFI Capital

4.     Unemployment Heads for New-High - PFI Capital Limited

5.     Nigeria's COVID-19 Induced Foreign Trade Decline - PFI Capital

6.     Inflationary Pressure Likely to Decelerate in July - PFI Capital Limited

7.     Implications of CBN's Exchange Rate Unification - PFI Capital Limited

8.     Nigeria's Debt Profile on a Rise - PFI Capital Limited

9.     A More than Expected Slowdown in Global Growth - PFI Capital

10.  Nigeria's Double-Whammy: Inflation and Unemployment - PFI Capital

11.   Performance Review of the Economic Recovery and Growth Plan - PFI Capital

12.  Implications of Nigeria's Consumption Expenditure Pattern - PFI Capital Limited

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