Last week, the National Bureau of Statistics, NBS, released the much awaited economic data showing that Nigeria’s economy contracted to its lowest in nearly 15 years.
In the report, Nigeria’s gross domestic product, GDP (the value of all goods and services produced in the country) for the first quarter of 2016 sunk to -0.36%. The consequence of this figure is more worrying given the fact that Q4 2015 GDP figure was 2.11%.
The country’s nominal GDP (value of GDP not adjusted for inflation) is now NGN 22.3 trillion while the real GDP (value of GDP after inflation adjustments) fell to NGN 15.9 trillion. The GDP figure of 2015 was 2.79% from 6.22% in 2014 (the same year NIgeria rebased its economy to overtake South Africa as Africa’s largest economy). The fall to a negative territory in the first quarter of this year is not a good sign.
Analysts and economists are already debating whether Nigeria would fall into a recession. As scary as this is, the doubts are there. As it is, no expert is betting on a recession for Nigeria. However, the possibilities are very high.
What makes a recession? Apparently, if Nigeria’s GDP enter another quarter of negative numbers, then technically, Nigeria is in a recession.
Since no certificate is issued for this status, it only becomes glaring when you look at the unemployment figures, foreclosures for few Nigerians can afford home loans and did default in their mortgage payments. Crash in home prices due to supply glut in the market. Nigeria is already in a stagflation (a situation where GDP is shrinking and inflation is rising), what happens in this Q2 will be a decider.
However, it is worthy to note that the lack of investors confidence grew further due to the political crisis that greeted the budget approval process. This contributed to an atmosphere of negative sentiments. Many portfolio investors exited the stock market. Companies where they pulled out their funds took drastic decisions to adjust to the uncertainty. This is evident in the unemployment data released by NBS. At least over 600,000 people lost their job in Q1.
Nigeria might not slip into a recession, but the growth process will be slow and damaging. The approval of the budget should be compensated with fast implementation across projects and basic infrastructure that can plug the leaking job numbers.
Also, what needs to be done very fast is a review of the country’s monetary policy, Forex policy and as a matter of fact, a quick tackling of inflation. Subsidizing production of good and services will bring back many lost jobs. Oil GDP would not do any major good to the numbers in Q2, so we have to look beyond oil.
Featured image: CNN Money
First published in NextGen, a newsletter of SBI Media Limited
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