Africa’s biggest economy has crashed into recession
August 31st, 2016
Nigeria’s Finance Minister
By Will Martin
Africa’s largest economy, Nigeria, has officially entered recession after two consecutive quarters of contraction.
Gross domestic product shrank by 2.06% in the second quarter of 2016, following a 0.36% shrinking in the first quarter, according to data released by the country’s National Bureau of Statistics on Wednesday.
Those two consecutive quarters of economic shrinkage mean the country is in its first recession in more than 20 years.
Recession in Nigeria may be an unwelcome development, but it is not unexpected. Earlier in the year, Godwin Emefiele, the governor of the Central Bank of Nigeria, warned “recession was imminent,” the Financial Times reports.
“We have long warned of a slow-burning crisis in Nigeria,” Capital Economics’ Africa economist, John Ashbourne, said in May. “It now seems that this view was too optimistic: The country is headed into a full-blown economic crisis.”
The International Monetary Fund has also warned on the state of the country’s economy, forecasting that growth will shrink by 1.8% in 2016.
The big driver of the slump in the Nigerian economy, which was one of Africa’s great success stories until recently, has been the persistently low price of oil over the past 2 1/2 years. Nigeria relies heavily on oil and is the largest producer of the commodity on the continent, producing roughly 2.4 million barrels a day. Given that oil’s price has slumped from more than $100 a barrel in 2014 to roughly $48 now, it is perhaps unsurprising that the country has struggled to find economic growth.
The Nigerian oil industry’s problems have been made even worse by a series of major disruptions in the oil-rich Niger Delta area, caused largely by a militant group calling itself the Niger Delta Avengers. Most notably, the group attacked a Chevron offshore facility in May and the underwater Forcados export pipeline operated by Shell in late March. The production disruptions caused by these attacks and others have wreaked havoc with the already stricken industry.
Dr. Yemi Kale, the CEO of the National Bureau of Statistics, tweeted to illustrate just how badly oil revenues in the country had been hit:
Courtesy: yahoo.com