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.
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
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%).
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.
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.
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.
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.
Download the full report: GDP Report Q3 2020
CBN extends Covid-19 forbearance for intervention loans by another 12 months
CBN will continue to charge an interest rate of 5% for its intervention loans for another 1 year.
The Central Bank of Nigeria has announced an extension of its regulatory forbearance for the restructuring of its intervention facilities by another 12 months.
In a circular signed by Dr. Kevin Amugo, the Director of Financial Policy and Regulatory. the apex bank said it will continue to charge its borrowers an interest rate of 5% per annum as against the 9% originally offered. The CBN had on March 20th reduced the interest rates on its intervention loans from 9% to 5% as part of its response to the economic crunch brought on by Covid-19 induced lockdowns.
The CBN also offered to rollover moratorium granted on all principal payments on a case by case basis. All credit facilities had been granted a one-year moratorium starting from march 1, 2020 when the pandemic first gripped Nigeria.
See excerpt from Circular
“The Central Bank of Nigeria reduced the interest rates on the CBN intervention facilities from 9% to 5% per annum for one-year effective March 1, 2020, as part of measures to mitigate the negative impact of COVID-19 Pandemic on the Nigerian economy.”
Credit facilities, availed through participating banks and OFIs, were also granted a one-year moratorium on all principal payments with effect from March 1, 2020.
Following the expiration of the above timelines, the CBN hereby approves as follows:
1) The extension by another twelve (12) months to February 28, 2022 of the discounted interest rate for the CBN intervention facilities;
2) The roll-over of the moratorium on the above facilities shall be considered on a case by case basis.
What this means
Companies who secured intervention funds from the CBN or through any of its on-lending banks will continue to service the loans at an interest rate of 5% per annum instead of 9%.
- They can also get another year of not needing to pay back the principal sum collection. However, they will need to apply.
- Whilst this move helps the small businesses continue to manage their cash flow, it means the CBN will record a reduction in its income extended under such facility.
- Regulatory forbearance is a widely adopted concept during an economic crunch and it is meant to help stimulate businesses. These pronouncements if implemented will only affect those who borrow from the CBN or BOI but those who do not will miss out.
- Download the circular here.
Senate endorses ex-Service Chiefs as Non-career Ambassadors
The Senate has confirmed President Buhari’s nomination of the immediate past service chiefs as non-career ambassadors.
The Nigerian Senate has endorsed the nomination of the past serving Military Service Chiefs as Non-career Ambassadors.
This was confirmed during Tuesday’s plenary session and announced in a social media statement by the Nigerian Senate.
Their confirmation follows the consideration of the report of the Senate Committee on Foreign Affairs, Chaired by Senator Adamu Bulkachuwa.
According to reports, the Senate Minority Leader Enyinaya Abaribe, however, questioned the nomination and confirmation of the ex-service chiefs when the Senate had on 3 different occasions called for their sack.
Senator Abaribe also raised issues on the petitions against the former service chiefs and questioned why they were dismissed without explanations.
But Senate President Ahmad Lawan dismissed Senator Abaribe’s concerns, ruling that the nomination of the former service chiefs cannot be nullified simply because the upper chamber had called for their sack, noting that this is totally a different assignment.
In his concluding statement, the Senate President, Senator Lawan added that these nominees that have just been confirmed have served this country to the best of their abilities. He appealed to the executive to make sure they use their experience as military men to the best.
“These nominees that we have just confirmed are nominees that have served this country to the best of their ability. Our appeal to the Executive is to make sure they use their experiences as military men to the best,” Lawan said.
Lawan, on behalf of the senate, wished them a very successful career in their capacity as Non-Career Ambassadors.
What you should know
- Recall Nairametrics reported earlier this month that President Muhammadu Buhari nominated ex-Service Chiefs for Senate approval as non-career Ambassadors-Designate.
- Their appointment came barely a week after their retirement as service chiefs and their replacement with new ones.
- This led to a spate of criticisms from some Nigerians who felt that the nation’s security situation got worse under their watch.
- They were reported to have tendered their resignation from their positions amid heightened calls that they should be sacked due to the increasing rate of insecurity across the country.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- Seplat falls into a loss in FY 2020
- 2020 FY Results: Cornerstone Insurance Plc reports a 61.1% decline in profit
- Ellah Lakes increases operating expenses by 33.36% in HY 2020
- 2020 FY Results: Nigerian Breweries reports a 54.3% decline in profits in 2020
- Abbey Mortgage Bank projects N51.08 million profit in Q2 2020.