ABUJA, Aug 26 – Nigeria expects the third and fourth quarters to reflect the continued effects of a slowdown, after the economy contracted by 6.1% in the second quarter, the presidency said on Wednesday.
Nigeria, Africa’s largest economy and top oil producer, faces its worst crisis in four decades due to low crude prices, and the impact of the novel coronavirus pandemic, which hurt demand for its main export commodity.
“It is anticipated that while the third and fourth quarters will reflect continued effects of the slowdown, the fiscal and monetary policy initiatives being deployed by government in a phased process will be a robust response to the challenges posed by the COVID-19 pandemic,” said a statement issued by the presidency.
Policymakers face a raft of challenges. Inflation rose to 12.82% in July, its highest level in more than two years, and the unemployment rate stood at 27.1% in the second quarter.
Crude oil production was 1.81 million barrels a day in the second quarter, compared with 1.98 in the same 2019 period. A global oil price crash due to reduced demand from the pandemic saw the oil sector shrink by 6.63% in the second quarter.
The non-oil sector declined by 6.05%, which the statistics said was the first decline in real non-oil GDP growth in nearly three years.
Nigeria’s economy was already grappling with sluggish growth before the pandemic in the wake of a 2016 recession. The International Monetary Fund has said it sees Nigeria’s GDP falling 5.4% this year, while the government expects the economy to shrink by as much as 8.9%.
“Given that lockdown measures have been loosened in recent months and oil prices have picked up, Q2 might be the trough of this year’s recession in Nigeria,” said John Ashbourne, global emerging markets economist at Fitch Solutions.
The World Bank has warned that Nigeria potentially faces its worst financial crisis in four decades due to the crash in oil prices and the pandemic. However, the bank is also unlikely to approve a much-needed $1.5 billion loan for Nigeria due to concerns over desired reforms, sources familiar with the talks told Reuters this month.
Inflation in Nigeria rose to 12.82% in July, its highest level in more than two years, and the unemployment rate stood at 27.1% in the second quarter, according to data released earlier this month.