Monday, November 21, 2016
Africa's largest economy is stuck in a painful recession
Africa's biggest economy Nigeria is stuck in a painful recession with no end in sight, according to the latest official data released on Monday.
Gross domestic product shrank by 2.24% in the third quarter of 2016, following a 2.06% contraction in the second quarter, and a 0.36% shrinking in the first quarter, according to data released by the country's National Bureau of Statistics.
That extends the country's recession, which started in Q2, into a third quarter. Nigeria's ongoing recession is its first in 20 years. The continued recession is even deeper than expected, with economists polled by Bloomberg in the run-up to the data's release forecasting a contraction of just 2%.
The big driver of the slump in the Nigerian economy, which was one of Africa's great success stories until recently, has been the persistently low price of oil over the past 2 1/2 years. Nigeria relies heavily on oil and is the largest producer of the commodity on the continent, producing roughly 2.4 million barrels a day. Given that the price of oil has slumped from more than $100 a barrel in 2014 to roughly $48 now, it is perhaps unsurprising that the country has struggled to find economic growth.
The Nigerian oil industry's problems have been made even worse by a series of major disruptions in the oil-rich Niger Delta area, caused largely by a militant group calling itself the Niger Delta Avengers. Most notably, the group attacked a Chevron offshore facility in May and the underwater Forcados export pipeline operated by Shell in late March. The production disruptions caused by these attacks and others have wreaked havoc with the already stricken industry.
The Avengers activities seemed to dwindle over the summer, but they have re-emerged in the past couple of months, and over the weekend vowed to blow up more oil facilities in the Niger Delta region because of an ongoing dispute with the government regarding criminal charges against a former militant leader called Government Ekpemupolo, Nigeria Today reports.
The mining sector has also been a big issue for the country's economy. Output was more than 20% lower than in the same period in 2015, the Nigerian National Bureau of Statistics said (emphasis ours):
"In real terms, Mining and Quarrying sector slowed by – 21.64% (year-on-year) in the third quarter of 2016 which was 22.77% points lower than rates recorded in the same Quarter of 2015, also 4.45% points lower than rates recorded in second quarter of 2016. The contribution of Mining and Quarrying to Real GDP in the third quarter of 2016 stood at 8.34%, showing a decline of 2.06% points relative to the corresponding quarter of 2015 and also a decline of 0.07% points relative to the second quarter of 2016."
Nigeria could now be set for its first full-year recession since 1991, with Dr Yemi Kale, the head of Nigeria's statistical agency saying in a tweet that "Nigeria needs…growth in Q4 of 4.32 per cent to avoid full year negative growth."
Nigeria's economic picture is made even worse by spiralling inflation — which as Business Insider's Elena Holodny reported last week — has hit an 11-year high.
Consumer prices rose by 18.3% year-over-year in October, according to data from the central bank, accelerating from the previous month's rate of 17.9%.
This was the highest rate since October 2005, and the 12th consecutive month it accelerated. The rate was in line with the median Bloomberg estimate.