Africa’s biggest economy slips into recession as oil output declines

*Nigerian GDP contracts 3.6% in third quarter from year earlier, as oil production is at the lowest in four years after OPEC+ cuts

Isola Moses | ConsumerConnect

Africa’s largest economy, again, has slumped into a recession in the third quarter as oil production dropped to a four-year low.

Nigeria’s Gross Domestic Product (GDP) in Q3 2020 shrank 3.6% in the three months through September from a year earlier, compared with a 6.1% contraction in the previous quarter

Dr. Yemi Kale, Director-General, National Bureau of Statistics (NBS) and Statistician-General, disclosed this Saturday, November 21, 2020, in a report posted on Twitter.

However, the median estimate of six economists in a Bloomberg survey was for a 5.3% decline, according to report.

Source: National Bureau of Statistics, Nigeria

As Nigeria’s economy contracted for a second consecutive quarter, oil production was reported to have dropped to 1.67 million barrels a day from previous 1.81 million barrels in the last three months.

The development was said to be the lowest since the third quarter in 2016, when the economy was in a contraction that lasted for over a year.

Africa’s top crude producer cut production in order to reach full OPEC+ compliance, report said.

While crude contributes less than 10% to Nigeria’s GDP, it accounts for about 90% of foreign-exchange earnings and half of government revenue.

That means the plunge in oil prices in the wake of the pandemic, which struck as the economy’s recovery from a 2016 slump was still gaining traction, has emptied coffers.

The contraction could further complicate the task of the central bank’s monetary policy committee as it starts its two-day meeting on interest rates next Monday.

The panel surprised with a 100-basis-point cut in September to support the economy.

It was gathered that as it is already above target for more than five years, inflation has continued to accelerate and pressure on the naira increased, which may force the MPC to hold Tuesday.

The twin impact of Coronavirus lockdowns and the plunge in the price of oil hit the West African economy harder than most on the continent.

Land borders have been closed since last August in an attempt to curb smuggling and boost local production.

Instead, it’s weighed on Nigerian exports and on the supply of some food products, adding to inflation, agency report said.

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