The Nigerian economy contracted 6.2% y/y in Q2:2020 from 1.8% y/y in Q1:2020, in what Afrinvest analysts regard as the worst quarterly performance on record based on the latest report published by the National Bureau of Statistics (NBS).
Also, Bismarck Rewane, CEO, Financial Derivatives Company and a member of the Economic Advisory Council (ECA) says the report on the economy should push the country to start “doing some things differently, “.
Specifically, the non-oil sector contracted 6.6% y/y from 1.6% in the prior quarter, driven by a sharp deterioration in the manufacturing (-8.9% y/y), trade (-16.6% y/y), real estate (-22.0% y/y), construction (-31.8% y/y) and transportation (-49.2% y/y) sectors.
In the oil sector, there was a sharp reduction in real GDP by 6.6% y/y compared to an expansion of 5.1% y/y in Q1:2020.
The slowdown in the oil sector reflected partial compliance to OPEC output cuts, with oil production at 1.8mb/d in Q2:2020 compared to 2.0mb/d in Q2:2019 and 2.1mb/d in Q1:2020, according to the Afrinvest analysts.
They also attribute the weakness in growth to the COVID-19 pandemic, given the lockdown and social distancing measures implemented in early Q2:2020 to contain the spread of the virus.
They also attribute the weakness in growth to the COVID-19 pandemic, given the lockdown and social distancing measures implemented in early Q2:2020 to contain the spread of the virus.
This.according to them was driven by the shutdown of economic activities in many key sectors domestically – especially services – and other COVID-19 related factors including the restrictions on international trade.
Consequently, the development may have ended the 3-year trend of low but positive real growth rates recorded since the 2016/17 recession
According to Rewane, who spoke on Channels television Monday, the decline was “surprising and concerning” but not “alarming at this point in time.”
“The truth is that the economy had its pre-existing conditions in Q1 and the lag between the slow down and the contraction was underestimated by all analysts,”
He pointed out that the Federal Government’s stimulus plan for the economy was inadequate to cover for the shortfall recorded by the NBS.
“We have a N2.5trn equipment to fight a 12trn contraction,” he said. “So the limitations and inadequacies and inappropriateness of the tools, compared to the problem we have, is stacked.
“So we are saying that the move from a slowdown into a contraction was more than we expected. The tools that we have at our disposal are inadequate. The stimulus that is required to take us out of this equation is going to be much more than we expected. And we are going to have to take some measures.”
The foremost Economist added that the country was now faced with a quadrilemma, a situation in which a choice must be made between four undesirable options.
“The first variable we are looking at is recession, negative growth,” he said. “The second variable is high inflation, which is almost 13 percent.
“The third variable is high unemployment; even though the unemployment numbers are at 28 percent, we think that it is much more than that. And finally, we have weaknesses in currency.
“So we are having external weaknesses and vulnerabilities, slow growth, high unemployment, and, more than anything else, contraction in economic activity.
“Now we are going to move away from the monetary policy complement that we have, stimulate the economy with greater catalyst, and do some things differently, ” he said.
“We have a N2.5trn equipment to fight a 12trn contraction,” he said. “So the limitations and inadequacies and inappropriateness of the tools, compared to the problem we have, is stacked.
“So we are saying that the move from a slowdown into a contraction was more than we expected. The tools that we have at our disposal are inadequate. The stimulus that is required to take us out of this equation is going to be much more than we expected. And we are going to have to take some measures.”
The foremost Economist added that the country was now faced with a quadrilemma, a situation in which a choice must be made between four undesirable options.
“The first variable we are looking at is recession, negative growth,” he said. “The second variable is high inflation, which is almost 13 percent.
“The third variable is high unemployment; even though the unemployment numbers are at 28 percent, we think that it is much more than that. And finally, we have weaknesses in currency.
“So we are having external weaknesses and vulnerabilities, slow growth, high unemployment, and, more than anything else, contraction in economic activity.
“Now we are going to move away from the monetary policy complement that we have, stimulate the economy with greater catalyst, and do some things differently, ” he said.