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Nigerian economy slips into recession as GDP contracts by 3.62% in Q3 2020

The Nigerian economy officially plunges into recession as the country’s GDP in real terms declined by -3.62% YoY in Q3 2020, the second contraction in 2020.

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Nigeria's GDP, Nigerian economy slips into recession as GDP contracts by 3.62% in Q3 2020

Nigeria’s Gross Domestic Product (GDP) in real terms declined by -3.62% (year-on-year) in Q3 2020, thereby marking a full-blown recession and second consecutive contraction from -6.10% recorded in the previous quarter (Q2 2020).

This is according to the third quarter (Q3) GDP report, released by the National Bureau of Statistics (NBS) on Saturday.

According to the report, the performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the COVID-19 pandemic.

Oil Sector plunges 

In Q3 2020, the oil sector contracted by –13.89% (year-on-year), indicating a sharp contraction of –20.38% points relative to the rate recorded in the corresponding quarter of 2019. Furthermore, oil sector decreased by –7.26% points when compared with growth recorded in Q2 2020 (6.63%).

The sector contributed 8.73% to total real GDP in Q3 2020, down from 9.77% and 8.93% respectively recorded in the corresponding period of 2019 and the preceding quarter, Q2 2020.

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The average daily oil production recorded in the third quarter of 2020 stood at 1.67 million barrels per day (mbpd), or 0.37mbpd lower than the average production recorded in the same quarter of 2019 and 0.14mbpd lower than production volume recorded in the second quarter of 2020 (1.81mbpd)

Source: National Bureau of Statistics, Author’s compilation

READ: Nigeria’s oil sector contracts by 13.89%, as covid-19 plunges economy into recession

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Non-oil recedes as manufacturing, trade, others plunge

The Nigeria’s non-oil sector contracted for the second time as the economy continues to reflect the impacts of Covid’19 pandemic. In Q3 2020, the non-oil sector grew by –2.51% in real terms during the reference quarter, which is –4.36% points lower than the rate recorded in Q3 2019 but 3.54% points higher than in the second quarter of 2020.

Key sectors that contracted in Q3 2020 in the non-oil segment are manufacturing, trade (wholesale and retail) accommodation and food services, real estate among others. On the other hand, the growth non-oil sector was driven mainly by Information and Communication (Telecommunications), with other drivers being Agriculture (Crop Production), Construction, Financial and Insurance (Financial Institutions).

In real terms, the non-oil sector contributed 91.27% to the nation’s GDP in the third quarter of 2020, higher than its share in the third quarter of 2019 (90.23% ) and the second quarter of 2020 (91.07%).

Agriculture Sector: Crop Production remained the major driver of the sector, accounting for 92.93% of overall nominal growth of the sector in third quarter 2020.

In the third quarter of 2020, the agricultural sector grew by 1.39% (year-on-year) in real terms, a drop of 0.89% points from the corresponding period of 2019(2.28%), and a decrease of –0.19% points from Q2 2020 (1.58%).

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In terms of contribution, the sector contributed 30.77% to overall GDP in real terms in Q3 2020, higher than the contribution in the third quarter of 2019 and the second quarter of 2020 which stood at 29.25% and 24.65% respectively.

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Information and Communication: The Information and Communication, one of the resilient sectors in the Nigeran economy amidst Covid-19, is composed of the four activities of Telecommunications and Information Services; Publishing; Motion Picture, Sound Recording and Music Production; and Broadcasting.

In Q3 2020, Information and Communication sector grew by 14.56% in Q3 2020 from 16.52% in Q2 2020 and 9.88% in Q3 2019, largely driven by Telecommunications & Information Services.

Manufacturing: Manufacturing sector contracted by -1.51% in Q3 2020 from -8.78% in Q2 2020 and 1.1% in Q3 2019. The contribution of Manufacturing to nominal GDP in Q3 2020 was 13.56%, higher than in the corresponding period of 2019 (12.34%) and the second quarter of 2020 (11.79%).

Trade: In real terms, trade’s year on year growth stood at –12.12%, which was –10.67% points lower than the rate recorded the previous year (Q3 2019), but 4.46% points higher than in the preceding quarter at –16.59% growth rate. Trade’s contribution to GDP was 13.88%, lower than the 15.23% it represented in the previous year, and the 14.28% recorded in 2020.

Finance and Insurance: The Finance and Insurance Sector consists of the two subsectors, Financial Institutions and Insurance, which accounted for 88.89% and 11.11% of the sector in real terms in Q3 2020. Financial Institutions sector grew by 6.8% in Q3 2020 from 28.41% in Q2 2020 and 0.61% in Q3 2019. However, Insurance sector contracted by -18.67% in Q3 2020 from -29.53% in Q2 2020 and 3.96% in Q3 2019.

READ: Explainer: What does GDP actually mean, and how does it affect you?

The Bottom-line:  Nigeria’s economy slides into second recession in 5 years

GDP is Nigeria’s biggest economic data and it measures the monetary value of everything produced in the country. It depicts the nation’s total economic activity. A recession is a period of decline in general economic activity, typically defined when an economy experiences a decrease in its gross domestic product for two consecutive quarters.

The latest contraction in Nigeria’s GDP indicated the second recession in the country in the past 5 years. Recall that the Nigerian economy entered recession in Q2 2020 when GDP contracted by -2.06% for the second time in the year.

Analysts continue to dimension the recovery pattern for the Nigerian economy in 2021, with reputable outlets forecasting a slow recovery pattern on the back of possible second wave of Covid-19 pandemic currently distorting economic landscape in the advanced economies.

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IMF has forecasted the Nigerian economy will contract -4.3% in 2020, as the Central Bank continues to drive aggressive intervention to stimulate the economy on the path of recovery.

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READ: Nigerian economy going into recession, might contract by -8.9% – Finance Minister

Download the full report: GDP Report Q3 2020

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

5 Comments

5 Comments

  1. Tope

    November 21, 2020 at 12:08 pm

    Kindly help with a link to the NBS report. Thank you.

    • Maxiii

      November 21, 2020 at 9:41 pm

      Lol buharist!
      When you confirm from the NBS link you’ll agree this article is true and that Nigeria is deteriorating under your pay master Buhari ?

      Foolish president foolish followers!

  2. Bertwell Nyeduko

    November 21, 2020 at 12:29 pm

    What does it to us as livestock farmers?

  3. Anonymous

    November 21, 2020 at 1:41 pm

    Maybe the 4th quarter will be better.

  4. Ilke Smit

    November 24, 2020 at 7:42 pm

    Hello Bamidele Samuel Adesoji. Please note, an economy is only in a recession when there are two quarters of quarterly contraction. This is not the case here. Nigeria grew in 3Q20 at a satisfactory pace compared to other countries.

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Economy & Politics

National Assembly does not have power to replace constitution – Omo-Agege

The Deputy Senate President has stated that the National Assembly does not have the power to replace the constitution.

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National Assembly does not have power to replace constitution - Omo-Agege

The Deputy President of Senate, Ovie Omo-Agege, has stated that the National Assembly does not have the power to replace the constitution.

The Senator disclosed this at a meeting with the Alliance of Nigerian Patriots led by Amb. Umunna Orjiako on Wednesday. He was represented by his media aide, Mr. Yomi Odunuga.

READ: FG to inject over N198 billion on capital projects in power sector in 2021

Omo-Agege said what could be achieved was an amendment of the constitution by the National Assembly. He urged stakeholders to channel the demands of a new constitution towards constitutional amendment.

“I am not so sure that we as a Parliament have the power to replace the Constitution. We can only make amendments and it is explicit in sections 8 and 9 of the constitution on how we can do that and the requisite number of votes required.

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“I say that because there are some top attorneys in this country, who for some reasons, keep saying that we don’t even need any of this, that we should just bring a new constitution. We can’t do that.

“What we are mandated to do by law is to look at those provisions and bring them up-to-date with global best practices, especially to the extent that it tallies with the views of the majority of Nigerians. So we are not in a position to replace this constitution, but we can only amend.

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READ: Commercial banks in frenzy as they seek N1.5 trillion boost

The senator also said that the Senate would look into issues like restructuring if there is a major demand for it from Nigerians and also the exclusive legislative list.

“But, like I said, most of the issues you have raised here, like zones replacing states, that’s another euphemism for going back to the regions. We will look into that if that is what majority of our people want.

“You talked about devolution of powers. The preponderance of views we have received so far is that those 68 items are very wide and need to shed some weight and move them to the Concurrent Legislative List.”

READ: Update: Buhari seeks power to freeze accounts, clamp down on money launderers

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What you should know 

  • Nairametrics reported last week, that Sokoto State Governor, Aminu Tambuwal, said any plan to restructure Nigeria and the Constitution must pass through legal due process from the National Assembly.

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Economy & Politics

Dapo Abiodun presents N339 billion budget to Ogun State Assembly

Ogun State Governor has presented a N339 billion 2021 budget to the State House of Assembly.

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The Governor of Ogun State, Prince Dapo Abiodun, presented the N339 billion budget for 2021 tagged “Budget of Recovery and Sustainability,” to the Ogun State House of Assembly.

This was disclosed by the Governor on Wednesday after he presented the budget proposal to the House. He added that the budget will remain focused on completing as many projects as possible.

READ: We are working to clear N124 billion backlog of export claims – NEPC

READ: Buhari presents N13 trillion 2021 Budget to National Assembly

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READ: Reps to support total reforms in aviation industry through legislation – Speaker

What they are saying 

Aggregate expenditure for the State Government is N339billion, with a recurrent expenditure of N162billion and capital expenditure of N177billion,” the State Governor said in his statement.

He added that the budget would be focused on project completion in the state.

READ: Sanwo-Olu presents N1.1 trillion 2020 budget

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The budget remains focused on the completion of as many ongoing projects as possible. The State House of Assembly would be presented with the most critical projects, which we must all work collectively to ensure they receive adequate funding,” he said.

READ: Lagos Rail Mass Transit: House of Assembly approves N153 billion for construction

He also said that the budget will provide suitable grounds for recovery from the obvious economic challenges of the current fiscal year, while ensuring that Ogun State’s local economy remains sustainable going forward.

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Economy & Politics

Gov. Wike presents 2021 budget worth N448.6 billion

Rivers State Governor has presented the 2021 budget worth N448.66 billion to the Rivers State House of Assembly.

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Budget, Oyigbo: We announced curfew to prevent ethnic clashes- Wike, #EndSARS: IPOB killed 6 soldiers and 4 policemen, burnt police stations - Wike

The Governor of Rivers State, Nyesom Wike, has presented the 2021 budget titled “Budget of Recovery and Consolidation,” worth N448.66 billion to the Rivers State House of Assembly for consideration.

According to a report by the News Agency of Nigeria, the budget represents more than 20% increase over the 2020 Revised Budget of N300 billion.

READ: FG’s unsustainable budget deficit and debt service cost

What you should know

  • The 2021 budget comprises the sum of N305.89billion budgeted for capital expenditure, while N142.78billion is earmarked as recurrent expenditure.
  • Of the budgeted sum for capital expenditure, which represents 68.18% of the total sum constituted; Administrative Sector, N87.7 billion; Economic Sector, N105 billion; Law and Justice, N1.7 billion; Social sector, N132 billion; and deductions/Loan repayments, N38 billion.
  • N82.9 billion is budgeted for provision of infrastructure including roads, bridges and the completion of flyover projects at Okoro-Nu-Odo, Rumuola, Rumuogba, and GRA junctions, all in Port Harcourt metropolis.
  • Out of the sum budgeted for recurrent expenditure, N76 billion is for personnel costs; N18.8 billion is for overheads and N47.7 billion will be for grants and transfers to the consolidated revenue charges.

READ: IGR: States generate N612.9 billion in H1 2020, dips by 11.7% 

What they are saying

Commenting on the budget, the Governor said: “The 2021 budget will also prioritise security and sustain existing efforts in combating insecurity and keeping residents safe and secure.

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“We will also deliver the Ogoni/Andoni/Opobo unity road, the Eastern Bypass dualisation, 6th and 7th flyover projects and the Wakama road, as well as all other ongoing rural roads in our communities and local government areas across the state.”

READ: N200 billion Unclaimed Dividend: Securities dealers reject FG’s plan to manage fund

READ: SEC says state governments have borrowed N900 billion from capital market

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What this means

With about 68.18% of the total budget allocated to capital expenditure, this is a pointer that the present administration is committed to continuing various capital and developmental projects aimed at transforming the state, advancing its economic and social growth, and positioning it as one of the frontline states in Nigeria.

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