The National Bureau of Statistics (NBS) has reported a contraction in Nigeria’s Gross Domestic Product (GDP) in the second quarter of 2020.1 The report stated a contraction of -6.10% in comparison to the 1.87% growth that was recorded in the first quarter of the year. This contraction is attributed to the COVID-19 pandemic, the consequential decline of output and the crashing of oil prices. Nigeria slowly recovered from recession in 2017 and has been on a gradual path towards growth. However, the current GDP contractions indicate that a second recession could be approaching. Steep declines in GDP growth calls for the diversification of the economy to stimulate growth in various areas including agriculture and agribusiness, manufacturing, and real estate. In addition, overreliance on global value chains particularly in the manufacturing sector should be curbed in order to improve resilience.
September 28, 2020
Nigeria Economic Update (Issue 36)
The naira depreciated by 4.3 percent to a record low of N313/$ at the interbank market segment on July 29, 2016.Precisely, the lack of liquidity in all FX market segments continues to weaken the naira. In order to increase FOREX liquidity, moderate inflationary pressures, encourage capital inflows and support the naira, the CBN may need to increase the supply of FOREX in the interbank market while simultaneously mopping up idle funds through the sale of securities.
The naira/dollar exchange rate remained largely stable at the parallel market at ?320/$ during the period7, albeit slight fluctuations on February 29, 2016 (?325/$) and March 2, 2016 (?328/$). The decline in the hoarding of foreign currency as well as the substantial reduction in the speculative demand for dollars were the two key factors responsible for the ease of fluctuations in the forex market8. With the slight increase in the price of crude oil, Nigerias foreign reserve slightly grew by $56 million, from 27.81 billion to $27.84 billion9. With the continued increase in the price of crude oil, a modest build-up of foreign reserve to guard against unfavourable commodity price movements is expected in the near term.