According to the World Bank, Nigeria emerged from recession earlier than expected in its October 2020 Sub-Saharan Africa estimate (SSA).
Despite a rise in oil prices, Nigeria’s oil sector suffered in the fourth quarter of 2020, according to the bank’s newest Africa Pulse Report for April 2021, titled ‘COVID-19 and the Future of Work in Africa: Emerging Trends in Digital Technology Adoption.’
Nigeria emerged from its second recession in five years with a 0.11 percent growth in February 2021, according to the National Bureau of Statistics (NBS).
Is Nigeria currently experiencing a downturn?
According to the World Bank, the economy of Sub-Saharan Africa will contract by 2.1 percent in 2020, and by 5.1 percent in 2025. Nigeria’s economy, meanwhile, has officially entered a recession for the second time in the previous five years.
Is Nigeria set to enter a recession in 2021?
In 2020, the Nigerian economy entered a new recession, reversing three years of progress following the 2016 recession.
Containment measures against COVID-19, which harmed aviation, tourism, hospitality, restaurants, manufacturing, and trade, and so disrupted the global economy, triggered the 2020 recession. The GDP shrank by 3.6 percent in the third quarter after contracting by 6.1 percent in the previous quarter.
The country had left recession once more by the end of the year. The Nigerian economy in 2021 was shaped by the confirmation of the end of the recession, as well as other significant happenings.
When did Nigeria emerge from its economic slump?
Nigeria’s economy emerged from recession in the fourth quarter of 2020, achieving its first gain in three quarters as the country’s coronavirus-related lockdown was lifted, according to a report released Thursday by the National Bureau of Statistics.
According to the data, GDP increased 0.11 percent from a year ago in the three months between October and December.
The economy dropped by 3.6 percent in the third quarter of 2020, after contracting by 6.1 percent in the second quarter, resulting in Nigeria’s second recession in five years.
The GDP contracted 1.92 percent in 2020, which was better than the International Monetary Fund’s forecast.
Although the growth was small, the NBS said Thursday that it represents the gradual restoration of economic activity following the relaxation of restricted movements and limited local and international business activities in previous quarters.
“As a result, while the Q4 2020 growth rate was 2.44 percent points lower than the previous year, it was 3.74 percent points better than Q3 2020,” according to the NBS.
Real GDP growth was 9.68 percent quarter over quarter in 2020, marking the second consecutive positive quarter over quarter growth rate following two negative quarters.
However, the annual growth rate of real GDP in 2020 is expected to be 1.92 percent, a drop of 4.20 percentage points from the 2.27 percent achieved in 2019.
How did Nigeria emerge from its economic crisis?
All five sub-sectors, including those that are still in contraction, saw significant improvement in their Real GDP Growth statistics.
- Crop Production’s GDP, for example, increased by 3.42 percent in the fourth quarter compared to 1.39 percent the previous quarter, virtually doubling quarter on quarter. Crop production accounts for a considerable amount of Nigeria’s GDP, and it accounts for the majority of it.
- Trade GDP, which accounts for 15.5 percent of total GDP, shrank by 3.2 percent in the third quarter, compared to a contraction of 12.12 percent in the previous quarter. This is an example of a sector that has vastly improved despite the fact that it is still in recession.
- In the fourth quarter of this year, the telecommunications sector rose by 17.64 percent, compared to 17.36 percent the previous quarter. The telecommunications sector has grown to become one of the largest in the economy, with a share of 12.2 percent. We feel that this sector is a major driver for Nigeria’s economic recovery.
- Finally, the Real Estate sector, which had been in decline since the second quarter of 2019, grew by 2.81 percent in the fourth quarter, bringing it out of recession.
- As a result, the GDP performances of trade, telecommunications, real estate, and crop production are the reasons we are no longer in recession.
What is Nigeria’s economic future?
Nigeria went into its biggest recession in four decades in 2020, but growth rebounded in the fourth quarter when pandemic restrictions were removed, oil prices recovered, and the government launched plans to counteract the economic impact. As a result, the Nigerian economy contracted less (-1.8 percent) in 2020 than had been predicted when the pandemic began (-3.2 percent). As part of its response, the administration implemented a number of long-awaited policy measures, frequently in the face of strong opposition. Specifically, the government (1) began harmonizing exchange rates; (2) began eliminating gasoline subsidies; (3) began adjusting electricity tariffs to more cost-reflective levels; (4) reduced non-essential spending and redirected resources to COVID-19 (coronavirus) responses at both the federal and state levels; and (5) improved debt management and increased public-sector transparency, particularly for oil and gas operations. These actions were crucial in preserving the economy from a far deeper recession and establishing the groundwork for an early recovery by creating greater fiscal flexibility and maximizing the impact of the government’s limited resources. However, numerous crucial changes remain unfinished, endangering Nigeria’s fragile recovery. Nigeria’s GDP is predicted to rise by 1.8 percent in 2021 under the baseline scenario. Despite the current favorable external environment, which includes rising oil prices and growth in advanced nations, reform snafus would stymie Nigeria’s economic expansion and thwart progress toward its development goals. The pace of economic recovery would slow in a risk scenario in which the government fails to maintain recent macroeconomic and structural reforms, and GDP growth in 2021 may be as low as 1.1 percent.
Is Nigeria’s economy in good shape?
Nigeria is a 36-state federation with the Federal Capital Territory that is multi-ethnic and culturally diverse. The ruling All Progressives Congress (APC) controls the executive branch of government and retains a majority of seats in both the Senate and the House of Representatives in parliament, as well as 23 of the 36 state governorships.
In the 2019 presidential elections, Muhammadu Buhari was re-elected to a second term. In February 2023, general elections will be held. The fight against the Boko Haram terrorist organisation in the northern states, as well as incidences of banditry and kidnappings in the north-west and persistent turmoil in the southeast due to separatist agitations, have impacted the security environment since 2011.
Nigeria went into its severe recession in two decades in 2020, but growth returned in 2021 when pandemic restrictions were removed, oil prices recovered, and the government launched plans to counteract the economic impact. Nigeria was particularly vulnerable to COVID-19’s worldwide economic disruption, which was exacerbated by the drop in oil prices. Over 80% of exports, a third of banking sector loans, and half of government revenue come from oil. In 2018, 40% of Nigerians (83 million people) were poor, and another 25% (53 million) were vulnerable. In the years 201923, the number of Nigerians living in poverty is predicted to climb by 12 million.
In 2020, the government implemented long-awaited policy adjustments as part of its COVID-19 reaction. It did this by: I beginning to harmonize exchange rates; (ii) initiating reforms to eliminate gasoline subsidies; (iii) adjusting electricity tariffs to more cost-reflective levels; (iv) reducing non-essential spending; and (v) improving debt management and increasing transparency in the public sector, particularly in the oil and gas sector.
Nigeria’s labor market is still being disrupted by the COVID-19 problem. While it has now surpassed pre-pandemic levels, the gains have been mostly attributable to workers shifting to small-scale, non-farm entrepreneurial activities such as retail and commerce, which have unstable revenue streams.
Nigeria’s economic prospects are still bleak. The timing of immunizations and the duration of COVID-19 remain unknown. Furthermore, the modest planned rebound could be jeopardized by oil sector instability, including an unexpected shock to oil prices, as well as banking sector problems. Even in the most favorable global environment, Nigeria’s policy response will be critical in laying the groundwork for a strong recovery.
Inequality in terms of income and opportunities is still high, and it has hampered poverty reduction efforts. High poverty levels, regional inequality, and social and political turmoil are all caused by a lack of job possibilities. High inflation has had a negative impact on household welfare, and high prices in 2020 are expected to push another 7 million Nigerians into poverty.
Is the economy of Nigeria improving?
The Nigerian economy is predicted to increase by 2.5 percent in 2022, up from 2.4 percent in 2021, according to the World Bank.
Nigeria’s growth is expected to pick up to 2.5 percent in 2022 and 2.8 percent in 2023, according to the bank’s January 2022 Global Economic Prospects report, which was released Tuesday.
It noted increased growth in telecommunications and financial sectors, as well as a return in higher oil prices.
“Higher oil prices, a gradual lifting of the Organization of Petroleum Exporting Countries (OPEC) output curbs, and local regulatory reforms should boost the oil sector,” it stated.
“Service sector activity is likely to pick up, especially in telecommunications and financial services.”
However, it is projected that the reversal of pandemic-induced income and employment losses will be sluggish, and that this, along with high food prices, will hinder the recovery of domestic demand.
“New concerns from COVID-19 variants, as well as rising inflation, debt, and income inequality, could jeopardize emerging and developing economies’ recovery,” according to the research.
High levels of violence and social discontent in some sections of the country, as well as the potential of further COVID-19 flare-ups, will continue to stifle non-oil economic development, according to the report.
Why is Nigeria’s economy stagnant?
Many structural difficulties limit Nigeria’s economic potential, including insufficient infrastructure, tariff and non-tariff trade barriers, investment barriers, currency valuation uncertainty, and limited foreign exchange capacity.
Its economic stability depends on sustained broad-based economic growth and poverty reduction. The United States Agency for International Development (USAID) backs the government’s efforts to reduce poverty through increasing agricultural output and creating jobs in rural areas. It also seeks to promote market access, increase energy supply, remove trade barriers, and expand access to safe drinking water. We assist in the creation of a policy climate that is friendly to small enterprises, as well as expanding access to market-driven vocational and technical training that is related to private-sector job possibilities. Access to commercial financial services, particularly microfinance, is also a priority of US assistance.
What is the economic crisis in Nigeria?
ABUJA, 15 JUNE 2021 Nigeria’s economy contracted by 1.8 percent in 2020, the most since 1983. The economic recession was triggered by the COVID-19 crisis; the external environment was characterized by capital withdrawals, increased risk aversion, low oil prices, and falling foreign remittances.
Nigeria’s Current Situation According to Resilience through Reforms, the Nigerian government’s reforms were crucial and timely in reducing the impact of the recession on the economy and creating additional fiscal headroom. Slippages in reform would jeopardize the recovery’s speed and hinder the government’s ability to solve human and physical capital shortages.
The paper addresses policy alternatives for lowering inflation, protecting the poor and vulnerable, and assisting the revival of the economy. To achieve these objectives, major efforts in exchange rate management, monetary policy, trade policy, fiscal policy, and social protection would be required. The following are some specific measures that should be taken:
- To decrease distortions in allocations in the private and public sectors, and to ensure that agents can access foreign exchange in a timely and orderly manner, at an agreed rate, exchange rate management rules should be made more transparent and predictable.
- Priorities and objectives for monetary policy that are well defined, with price stability as the primary goal. Resumption of naira-denominated open-market operations (OMOs) on a clear issuance schedule, as well as a signal to markets that OMOs will use short-maturity securities to maintain price stability.
- Reopening land borders to trade completely and effectively, as well as enhancing regional cooperation to combat smuggling.
- Imports of staple foods and pharmaceuticals will be made easier by eliminating them from the list of foreign exchange (FX) limitations and replacing them with tariffs that are aligned with the ECOWAS Common External Tariff.
- Creating tools to track and report the federal government’s stock of Central Bank overdrafts in order to keep the money supply under control.
- Full elimination of the gasoline subsidy; and the design of a series of reforms to raise non-oil revenue in a way that does not jeopardize the economy’s recovery, such as raising excise taxes on harmful consumer goods, rationalizing tax expenditures, closing tax loopholes, and improving tax compliance by strengthening revenue administration.
- Using the National Social Safety Nets Program (NASSP) to give more household payments and temporarily enhance transfers to current beneficiaries.
Nigeria’s GDP is predicted to increase by 1.8 percent in 2021, yet the prognosis is quite uncertain. The rebound would be fueled by an increase in oil exports as well as increased local consumption. Nigeria’s recovery, on the other hand, is predicted to lag behind that of other oil producers, and an unexpected drop in oil prices could jeopardize the moderate growth forecast. Furthermore, macroeconomic risks are exacerbated by rising inflation and unemployment, and tertiary sector activity will not fully stabilize unless COVID-19 is contained. Nigeria’s GDP is expected to approach 2010 levels by the end of 2021, reversing a decade of economic progress. Because the economy is expected to grow more slowly than the population, GDP per capita is expected to continue to decline.
What are the causes of Nigeria’s recession?
When things don’t go as planned and the economy doesn’t grow for two quarters in a row, a recession occurs. It is a major problem for any country, and Nigeria has only experienced it once before, in 2015/2016.
This could be due to a debt crisis, a severe cash shortage, or a shock such as the coronavirus epidemic. The current recession is not unique to Nigeria. All countries have suffered economically as a result of the COVID-19 problem.