The federal government yesterday admitted that the country’s economy was in full recession, having earlier said in July that what the country was experiencing was a technical recession.
The confirmation by the federal government followed the release of data by the National Bureau of Statistics (NBS) on Wednesday, which revealed that Nigeria’s economy nose-dived again in the second quarter of 2016, with the Gross Domestic Product (GDP) dropping by 2.06 per cent (year-on-year) in the same period, sliding the economy into full recession.
Minister of Finance, Mrs Kemi Adeosun, at a briefing after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari at the Presidential Villa, Abuja, pointed out that it was a difficult time for Nigeria, but said the nation could overcome the slump by diversifying its income base.
“I think that we have a long way to go. We’re not confused and we’re not deceiving ourselves that everything is rosy; it’s not. It’s a difficult time for Nigeria but I think Nigeria is in the right hands. And if we can stick with our strategy – we still have some adjustments to make; I think we need to make some adjustments in monetary policy; it’s quite clear we do and we will do that; we’re working on that, (then we’ll pull through),” the minister said.
According to the NBS data, the negative growth was lower by 1.70 per cent from the growth rate of 0.36 per cent recorded in the first quarter.
“In the Second Quarter of 2016, the nation’s GDP declined by -2.06 per cent (year-on-year) in real terms. This was lower by 1.70 per cent points from the growth rate of -0.36 per cent recorded in the preceding quarter, and also lower by 4.41 per cent points from the growth rate of 2.35 per cent recorded in the corresponding quarter of 2015. Quarter-on-quarter, real GDP increased by 0.82 per cent during the quarter, nominal GDP was N23,483,954.78 million (in nominal terms) at basic prices. This was 2.73 per cent higher than the Second Quarter 2015 value of N22,859,153.01 million. This growth was lower than the rate recorded in the Second Quarter of 2015 by 2.44 per cent points,” the NBS stated.
The statistics bureau further noted that inflation rose by 17.1 per cent (year-on-year), an 11-year high, translating to 0.6 points increase when compared with 16.5 per cent reported in June.
“In July the Consumer Price Index (CPI), which measures inflation, increased by 17.1 percent (year-on-year), 0.6 percent points higher from the rate recorded in June (16.5 percent),” the data indicated.
A close look at the figures showed that the increase in CPI manifested in all Classification of Individual Consumption According to Purpose (COICOP) divisions.
On the other hand, unemployment rate rose from 12.1 percent in the first quarter of 2016 by 1.78 per cent points to 13.3 per cent in the second quarter.
“In Q2 2016, the labour force population (i.e. those within the working age population willing, able and actively looking for work) increased to 79.9 million from 78.5 million in Q1 2016, representing an increase of 1.78% in the labour force during the quarter.
“This means 1.39 million persons from the economically active population entered the labour force,” the government agency said.
The current rate is the nation’s lowest level of unemployment in recent time, compared to Q4 2015 and Q1 2016 when the rate of labour force population increased by 1.59 million.
The report also showed that the approach of harvest season impacted the price of food items significantly during the month, as the Food Sub-index, which increased by 15.8 per cent (year-on-year) in July, was actually lower by 0.5 points from rates recorded in June.
The prices of some food items within the food sub-index basket – milk, cheese and eggs; oils, fats and fruit – increased at a slower pace during the month, while the price of imported foods soared by 0.4 per cent points from June to 20.5 per cent in July.
Also, the total capital import into the country in the second quarter of the year fell to $647.1 million, representing 8.98 per cent decline from what was recorded in the first quarter of the year.
“The total value of capital imported into Nigeria in the second quarter of 2016 was estimated to be $647.1 million, which represents a fall of 8.98 percent relative to the first quarter, and a fall of 75.73 percent relative to the second quarter of 2015. This provisional figure would be the lowest level of capital imported into the economy on record, and would also represent the largest year- on-year decrease,” the NBS said.
During the month, energy and energy-related prices dominated the increase line as reflected in the Core sub-index which increased by 16.9 per cent, translating to 0.7 percent points from rates recorded in June (16.2 percent).
The NBS said the highest increases were recorded in the electricity, liquid fuel (kerosene), solid fuels, and fuels and lubricants for personal transport equipment groups.
Month-on-month headline index also increased at a slower pace for the second consecutive month in July as the index rose by 1.3 percent points from 1.7 per cent posted in June
The finance minister who was joined by the ministers of information, Lai Mohammed; solid minerals development, Kayode Fayemi; agriculture, Audu Ogbeh, and education, Adamu Adamu, said: “It is the worst possible time for us. Are we confused? Absolutely not. How are we going to get ourselves out of this recession? One, we must make sure that we diversify our economy. There are too many of us to keep on relying on oil. We can see what happened at the output data of the oil and gas sector.”
She decried the country’s over dependence on oil, whereas 87 per cent of Nigeria’s GDP is non-oil and asserted that the attacks on oil installations by militants in the Niger Delta had dragged down the GDP of the entire economy, hence the need to drive those other areas.
“We have to invest in capital projects. No, we are not confused; the time is confusing but we are not confused. We are extremely focused. We know that if we can just bear and get through this difficult period, Nigeria is going to be better for it. If we rely on oil and the price of oil remains low and the quantity of oil remains low, we can’t grow. We have to grow our non-oil economy.
“We need to try and find a way to support the manufacturing sector better and we will do that. What we have is cost-put inflation and when you have cost-put inflation, it is structural inflation. It is not going to respond to monetary policy tools such as increasing the rate of interest. We have to address the structural causes of the inflation. The trend, the rate of inflation growth has slowed down and that’s a good sign,” Adeosun stated.
The minister also disclosed that FEC had approved an external three-year rolling borrowing plan.
She recalled that when the administration came in, it said external borrowings strategy would be focused on concessional debts, and low-cost loans, particularly from the multi-lateral agencies and added that this plan was put forward, approved by FEC and would be transmitted to the National Assembly for approval.
“Concessional loans average interest rate is 1.25 per cent, four to seven-year moratorium, 20 years to pay, from agencies such as the World Bank, African Development Bank, China Exim Bank, and other development agencies like Japanese International Cooperation Agency (JICA).
“The sectors in particular that these concessional loans will go to are the strategic sectors of the economy that will help to revive the economy. There is power;a significant amount of money is allocated to power projects, particularly transmission. This is long term money that will enable us solve some of the problems in that sector,” she said.
Adeosun further noted that some money provided by the World Bank had been allocated to help the government do some massive polio immunisation in order to contain the recent outbreak.
“There is provision for solid minerals and, of course, I’m very excited about the discovery of nickel. World Bank is supporting the project by the Ministry of Mines and Steel with $150 million to enable it strengthen its capacity in that area.
“The largest beneficiary of our borrowing is agriculture because it is equally strategic and we have programmes by the minister, some of which he inherited and is going to restructure and reform and some are new to the ministry,” she stated.
She stated that the balance will come from the Euro bond, adding that the Presidency will reach out to the National Assembly to get this borrowing plan approved as soon as possible “because a lot of these monies are for developmental projects.
“We need this money and it is available for us. Remember, these are foreign exchange coming to our country that will help our economy,” she concluded.
‘Economy will beat IMF’s -1.8% full year projection’
Special adviser to the president on economic matters, Dr Adeyemi Dipeolu, stated that besides the growth recorded in the agriculture and solid mineral sectors, the Nigerian economy, in response to the policies of the Buhari presidency, was doing better than what the International Monetary Fund (IMF) had estimated, with indications that the second half of the year would be even much better.
In July, the IMF had projected that the country’s economy was likely to contract by 1.8% this year, sliding it into recession.
Dipeolu in a statement by the spokesman to the vice president, Laolu Akande, said the GDP figures released by the NBS had indicated a hopeful expectation in the country’s economic trajectory despite confirming a temporary economic decline.
He said the Buhari presidency would continue to work diligently on the economy and engage with all stakeholders to ensure that beneficial policy initiatives are actively pursued and the dividends delivered to the Nigerian people.
“A close look at the data shows that this outcome was mostly due to a sharp contraction in the oil sector due to huge losses of crude oil production as a result of vandalism and sabotage,” the economic adviser pointed out.
He, however, expressed confidence that the rest of the Q2 data was beginning to tell a different story as there was growth in the agricultural and solid minerals sectors, which are the areas in which the federal government had placed particular priority.
Dipeolu noted that agriculture grew by 4.53 per cent in the second quarter of 2016 as compared with 3.09 per cent in the first quarter, the metal ores sector showed similar performance with coal mining, quarrying and other minerals also showing positive growth of over 2.5 per cent and notably, the share of investments in GDP increased to its highest levels since 2010, growing to about 17 per cent of GDP.
“The manufacturing sector, though not yet truly out of the woods, is beginning to show signs of recovery while the service sector similarly bears watching.
“Nevertheless, the data already shows a reduction in imports and an increase in locally produced goods and services; and this process will be maintained although it will start off slowly in these initial stages before picking up later,” he added.
The economic adviser said although the inflation rate remains high, the good news was that the month-on-month rate of increase had fallen continuously over the past three months.
“Unemployment remains stubbornly high, which is usually the case during growth slowdowns and for reasons of a structural nature,” he said.
According to him, the picture that emerges, barring unforeseen shocks, is that the areas given priority by the federal government are beginning to respond with understandable time lags to policy initiatives.
“Indeed, as the emphasis on capital expenditure begins to yield results and the investment/GDP numbers increase, the growth rate of the Nigerian economy is likely to improve further,” he stated, asserting that as these trends continue, the outlook for the rest of the year is that the Nigerian economy will beat the IMF prediction of -1.8 per cent for the full year 2016.
“The IMF had projected a growth of -1.8 percent for 2016; however, the economy is performing better than the IMF estimates so far. For the half year, it stands at -1.23 percent compared to an average of -1.80 percent expected on average by the IMF.
“What is more, it is likely the second half will be better than the first half of 2016. This is because many of the challenges faced in the first half either no longer exist or have eased,” he added.