Nigeria’s manufacturing sector has now seen 2 consecutive quarters of contraction, making it an official recession.
According to RenCap, the slowdown in Nigeria’s GDP was more attributable to a deceleration in the non-oil sector, rather than the continued contraction in the oil-sector.
“A decline in manufacturing and a slowdown in services explain the non-oil sector’s lacklustre performance”, it said.
The decline in the manufacturing sector is largely attributable to the largest sub-sector, food, beverages and tobacco, which contracted by 5.9% Year on Year in 2Q15, versus a growth of 5.2% Year on Year in 2Q14.
Rencap believes that the manufacturing sector’s decline in 1H15 is partly because of tight FX liquidity, which makes it difficult for manufacturers to acquire imported inputs. It is also likely that severe fuel shortages in 2Q15 undermined production and distribution.
RenCap also expects supply constraints, related to FX restrictions and the de facto import ban, to undermine growth in 2nd half of the year.
