By Joshua Elekwachi, Abuja
The Lagos Chamber of Commerce & Industry (LCCI) has said 2020 has been a very bad year over the nation’s contraction in Gross Domestic Product (GPD).
The Nigerian GDP report for Q3 2020 recorded a growth rate of –3.62per cent (year-on-year) in real terms in the third quarter of 2020.
The report by NBS on Saturday showed that the economy has contracted by -2.48per cent.
The bureau had expressed that GDP performance of Nigeria economy in third (Q3 2020) reflected residual effects of the restrictions to movement and economic activity over the response to the COVID-19 pandemic.
Nigeria for the second quarter reported contracted GDP performance, which translates into recession.
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock).
The Director-General, LCCI, Mr. Muda Yusuf in a statement obtained by Nigerian NewsDirect on Sunday stated that for 2020 economic perspective, Nigeria performance has been very bad, the worst in recent history.
According to him, “We are faced with the double jeopardy of a stumbling economy and spiraling inflation. The October inflation numbers of 14.23 per cent was the highest in 10 months. In economic parlance , this condition is characterised as stagflation. The effects of these developments are evident in business and in households.
“Sales are slowing, profit margins are being eroded, production costs are escalating, unemployment is rising, poverty situation is worsening, purchasing power is weakening and there is a general social discontent.
“Regrettably, and as if these were not bad enough, the business community continues to grapple with policy, institutional and regulatory challenges impeding investment.”
He noted that the news of the recession did not come as a surprise.
In his words, “The economic contraction was 3.62per cent in the third quarter as against 6.1 per cent in second quarter. With these numbers, we can possibly say that the worst is over as the contraction in the third quarter was much less than what we experienced in the second quarter.
“Regrettably, the #EndSARS crisis may cause the recession to linger to the fourth quarter. The protests and the destruction that followed was a major setback for our economic recovery prospects.”
On recovery, he suggested that “we need to restore normalcy to the foreign exchange market by broadening the scope of market expression in the allocation mechanism.
“The Ports processes, especially the key institutions in the international trade processes need to be more investment friendly. Trade is critical to recovery.
“We should show greater commitment to the fixing of the structural issues to reduce production and operating costs for investors in the economy.
“Following the #EndSARS experience, the state of internal security is beginning to impact negatively on investors confidence. Security presence is becoming less visible especially in the major cities. The psychological effects could adversely affect investment and economic recovery. We appreciate the setback suffered by the police as a result of the recent protests and we empathize with them. But we need to give security confidence to citizens and investors.
“Incidents of kidnapping, banditry, herders-farmer clashes have not abated. These also have grave implications for investments
“Hopefully, the economy will resume to the path of growth in the first or second quarter of 2021, barring any new disruptions to the economy.”
According to the NBS report, “While this represents an improvement of 2.48per cent points over the –6.10 per cent growth rate recorded in the preceding quarter (Q2 2020), it also indicates that two consecutive quarters of negative growth have been recorded in 2020.
“Furthermore, growth in Q3 2020 was slower by 5.90 per cent points when compared to the third quarter of 2019 which recorded a real growth rate of 2.28 per cent year on year.
“As these restrictions were lifted, businesses re-opened and international travel and trading activities resumed, some economic activities have returned to positive growth.
“A total of 18 economic activities recorded positive growth in Q3 2020, compared to 13 activities in Q2 2020.”
The report noted that in Q3 2020, aggregate GDP stood at N39.1trillion in nominal terms.
“This performance was 3.39per cent higher when compared to the third quarter of 2019 which recorded an aggregate of N37.81trillion.
“This rate was, however, lower relative to growth recorded in the third quarter of 2019 by –9.91per cent points but higher than the preceding quarter by 6.19per cent points.”
For clarity, the Nigerian economy has been broadly classified into the oil and non-oil sectors
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
Real growth for the oil sector was –13.89per cent (year-on-year) in Q3 2020, indicating a sharp contraction of –20.38per cent points relative to the rate recorded in the corresponding quarter of 2019.
Furthermore, real oil growth decreased by –7.26per cent points when compared with oil sector growth recorded in Q2 2020 (6.63per cent). Quarter on quarter.
However, the oil sector recorded a growth rate of 9.64% in Q3 2020. The sector contributed 8.73per cent to total real GDP in Q3 2020, down from 9.77per cent and 8.93per cent respectively recorded in the corresponding period of 2019 and the preceding quarter, Q2 2020.
The non-oil sector grew by –2.51per cent in real terms during the reference quarter, which is –4.36per cent points lower than the rate recorded in Q3 2019 but 3.54per cent points higher than in the second quarter of 2020.
The non-oil sector was driven mainly by Information and Communication (Telecommunications), with other drivers being Agriculture (Crop Production), Construction, Financial and Insurance (Financial Institutions), and Public Administration.
In real terms, the non-oil sector contributed 91.27per cent to the nation’s GDP in the third quarter of 2020, higher than its share in the third quarter of 2019 (90.23per cent ) and the second quarter of 2020 (91.07per cent).