The GDP growth rate in 2020Q2 was estimated to be -6.10%, the first negative growth since the recession in 2016/2017. The GDP declined by 8.22 percentage points from 1.87% to -6.10% between 2020Q1 and 2020Q21. The fall was largely driven by a slowdown in international and domestic activities occasioned by lockdown measures to prevent the spread of the coronavirus. Further disaggregation of the data shows that the non-oil sector GDP decreased by -6.05% (first negative decrease since 2017Q3). Also, the oil sector experienced a higher negative growth, declining by -6.63% within the same period. Contractions in growth were also recorded in the industry (-12.05%) and service sectors (-6.78%) while the growth rate in the agriculture sector remained positive (1.58%). Given that the strict lockdown measures were lifted at the end of the second quarter, and Nigeria’s major trading partners – Europe, the United States, and China – have reopened their economies, the GDP growth rate in 2020Q3 is expected to be more favourable than the preceding quarter. However, the coverage and targeting of the existing interventions for the vulnerable households and affected businesses should be improved in order to enhance their reach.
September 16, 2020
Nigeria Economic Update (Issue 34)
The external reserves decreased week-on-week marginally by 0.2 percent from June 9, 2017 to June 16, 2017. The reserve declined from $30.27 billion to $30.21 billion. Given that crude oil revenue constitutes the most part of the reserve, the decline may be reflective of the week-on-week drop in global crude oil price (Crude oil price fell by approximately 2 percent to $47.377 per barrel as at June 16 2017). The ongoing forex intervention by the monetary authority also poses a challenge to foreign reserve conservation. Given the unimpressive performance of global oil prices in recent time, there is need to explore other areas with great potentials to generate foreign exchange earnings. Diversification of forex earnings remains the key to insulating foreign reserve against fluctuations in global commodity prices. The country can tap into solid minerals sector as alternative source of foreign exchange. Huge investment together with investor-friendly policies in solid minerals would make the sector attractive to investors.
Latest figures of FDI flows to Nigeria show a decline of 27 per cent from $4.7 billion in 2014 to $3.4 billion in 20152, representing its lowest value since 2005. This decline is largely attributed to the oil price slump, which has generally increased uncertainty in the economy, with adverse effects on investors confidence. The fall in FDI flows was witnessed in most resource based economies in Africa, as FDI flows to the continent fell by 31 percent in 2015. The forex controls in place in Nigeria has also exacerbated the uncertainty in economy, and created obstacles for both domestic and foreign investors. Thus a review of the forex restrictions could send positive signals to investors.