Africa’s largest economy has slumped into a recession in the third quarter as oil production dropped to a four-year low.
Nigeria’s gross domestic product shrank 3.6% in the three months through September from a year earlier, compared with a 6.1% contraction in the previous quarter, Statistician-General Yemi Kale said Saturday in a report released on Twitter. The median estimate of six economists in a Bloomberg survey was for a 5.3% decline.
Oil production fell to 1.67 million barrels a day from 1.81 million barrels in the previous three months. That’s 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.
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 on Monday. The panel surprised with a 100-basis-point cut in September to support the economy.
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 on Tuesday.
The twin impact of coronavirus lockdowns and the plunge in the price of oil hit the economy harder than most on the continent. 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 International Monetary Fund forecasts Nigerian GDP will contract by 4.3% this year, the biggest drop nearly four decades.
However there is optimism of a rebound in 2021, with the Nigerian government earlier predicting a change in fortunes first quarter (Q1) of 2021.
Minister of Finance, Zainab Ahmed said this a few weeks ago when board members of the Federal Inland Revenue Service (FIRS) paid her a courtesy call.
She said: “The pandemic has not impacted much in Nigeria because of the proactive measures taken by government especially in the health sector.
“We are expecting by the first quarter of 2021, we shall be okay.”