economic slump sharpened in the third quarter as rebels
bombed oil pipelines in the restive south and businesses
struggled to access foreign exchange, official data
quarterly contraction in a row comes as the West African
nation reels from a crash in global oil prices, which
have collapsed from over $100 a barrel in 2014 to
currently around half that.
recession appeared inevitable when militants
renewed attacks on the country’s oil
infrastructure early this year, strangling
production that accounts for around 70 percent
of government revenue and the bulk of Nigeria’s
export earnings. The relentless sabotage has put
the Nigerian government under pressure as
economists increasingly question whether
President Muhammadu Buhari can pull the country
out of recession.
nation’s gross domestic product (GDP) contracted by
-2.24 percent year-on-year in real terms,” the country’s
National Bureau of Statistics said in a report. This
meant that third-quarter growth in Africa’s most
populous country was 0.18 percentage points weaker than
that recorded in the second quarter, and 5.1 points down
from third quarter growth in 2015.
“During the period under review, oil production averaged
at 1.63 million barrels per day (bpd),” the statistics
agency said. That is a 22-percent drop from the same
period in 2015, when Nigeria was producing 2.17 million
do the attacks have an instant impact on output, and
cause major damage to infrastructure, but continued
unrest will only further discourage international oil
companies from investing in oil projects,” Rhidoy
Rashid, oil analyst at Energy Aspects, said in a recent
“There seems to be no quick fix for uniting a heavily
divided region, so for now we expect further attacks and
subsequent volatility in Nigerian crude output.”
Manufacturing has also taken a big hit, shrinking by 2.9
percent in the third quarter in the wake of a devalued
naira and currency controls that have curbed trade.
“This is partly due to the continued fall in the
exchange rate, which makes imported inputs more
expensive, thereby increasing business costs,” the
statistics agency said.
“This is greatly a result of the continued fall in (the)
naira to dollar rate which translates to much higher
cost of business operations.”
Buhari had vowed not to “kill the naira” by letting it
fall in value, in opposition to depreciations by fellow
major oil exporters Angola and Russia.
His government tried to prop up the naira for months,
but that drained foreign currency reserves and it
eventually abandoned the currency peg in June.
But a dollar shortage still persists, with black market
rates hovering around 440 naira to the dollar this
month, compared to the official bank rate of
approximately 320 naira to the dollar.
The economic troubles look to last, with peace talks
between the Nigerian government and oil rebels falling
apart this month — the Niger Delta Avengers claimed they
bombed three pipelines last week — and foreign investors
steering clear until they see a more coherent economic
“The risk is that positive momentum will not necessarily
emerge on auto-pilot,” Razia Khan, Africa economist at
Standard Chartered Bank, told AFP.
“Actual reforms will be required in order to drive it –
and so far, these have been elusive.”
Economists cautioned that it was too early to say if the
worst of the crisis had passed.
“With oil output likely to fall yet again in the fourth
quarter, it is too early to call the bottom of Nigeria’s
economic downturn,” John Ashbourne, Africa economist at
research firm Capital Economics, said in a note.
“The bigger picture is that today’s figures suggest that
the downtown continued into the third quarter unabated,”
“Despite government efforts to boost domestic
production, the contraction of the manufacturing sector
worsened,” he said, adding “erratic policymaking
continues to pose a key risk to the economy”.
Nigeria overtook South Africa to become the continent’s
largest economy in 2014 after revising its GDP
statistics, yet it faces severe infrastructure
challenges and suffers from chronic power shortages,
poor roads and high unemployment.
The International Monetary Fund has forecast the West
African nation’s gross domestic product will shrink by
1.7 percent this year, the first full-year contraction
in more than two decades, according to Bloomberg News.
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