Data released by the Nigerian Bureau of Statistics today shows that Nigeria’s economy is finally out of a recession. GDP growth for Q2 of 2017 grew by 0.55%, halting five quarters of negative growth. As expected, there have been mixed reactions to this. Some have celebrated what they consider a praiseworthy feat which indicates that the government has finally turned the corner on revamping the economy.

Others are however less excited by the developments, and there are two reasons for this thinking: First, the turnaround to positive growth was predicted by many parties – it was expected, given how the negative growth had already caused the economy to contract, providing a low base for growth to start from. Seeing this, a growth of 0.55% not only does not compensate for the lost ground, it also is below expectations considering the low base the growth is starting from. Below is a chart showing the quarterly GDP growth trend:

 

The least negative growth in any quarter was -0.67% in Q1 of 2016. Subsequent contractions were higher, peaking at -2.34% in Q3 of 2016. The single quarter growth that now has the country out of recession is 0.55% and is less than the lowest period of contraction, from a much higher base.

The second and more crucial issue comes from a closer look at the issues that led to the recession. A contraction in government revenue due to persistent over dependence on the single revenue source that is oil was significant. This cascaded into currency controls that saw foreign capital leave, the ability of producers to import raw materials, and that of traders to import produce, severely hampered. A stubborn refusal to allow the naira float causing multiple exchange rates was the result, with arbitrage opportunities increasing to almost 100% at some point within the period.

Unfortunately, the Nigerian government has not taken advantage of the crisis to make tough decisions that will forestall such a recession in the short and long term. The moment oil prices take a big enough hit again, Nigeria will be headed back to a recession.

Business day

Finally, coming out a recession is not the same as the economy making a recovery. Nigeria is very far from recovering from the loss of the last eighteen months. It will be more beneficial if the government and its agents shelve the unnecessary celebration and backslapping. The recovery plans documented in the ERGP have been unfavourably reviewed by all informed observers of the Nigerian economy. We have wasted a crisis. We will do well not waste the aftermath of the crisis. It is time to get to serious work.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

1 COMMENT

  1. is the dollar floated or the pound ? without evil there cannot be goodness,just llke negativisn and positivism. about 2.5 billion dollar have been invested by white people investors in the last 6 months.last yeat the govt did supported the govt through infrastructural according to auntie kemi.this is why the economy did grew and it could grew faster.
    This is going to happen in Nigeria wether you like or not,this American website,you will be isolated and marginalized in Nigeria in digital media,the govt are going to closes the bbc and Bloomberg,you can write what you want to write in America,becauses there was weakeness of human spiritual balancing and growth,it peaked during Gen Abacha regime,and it was restored during baba obj administration.obj will not deceive Nigeria inspite of his fault.this recession is a accumulation of economic policy failure.all leaders after him have poor spiritual make-up

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