The National Bureau of Statistics (NBS) released its indices which showed that the economy had contracted for the second consecutive quarter.
Finance Minister Kemi Adeosun, speaking after the Federal Executive Council (FEC) meeting in Abuja, described the country as being in its “worst possible time”, but stressed there is a silver lining.
In its second quarter report, the NBS put the inflation rate at 17.1 per cent, It said the Gross Domestic Product (GDP) had contracted by 2.06 per cent in the second quarter. The economy contracted by 0.36 per cent in the first quarter.
The crisis is largely due to over dependence on oil as the mainstay of the economy over the years. It constitutes 70 per cent of Nigeria’s GDP and over 90 per cent of the value of its exports.
Oli price has crashed to less than $50 per barrel. Besides, Nigeria’s production output has tumbled by over 400,000 barrels due to militancy in the Niger Delta.
The NBS report showed that oil production plummeted to 1.69 million barrels per day (bpd) in Q2, down from 2.11 million bpd in Q1, with oil-based GDP contracting by 17.5 per cent in Q2.
The naira also dropped in value because of inability to match up with the demand for the dollar. Dollar exchanges for over N300 in the inter-bank market.
The report said 4.58 million Nigerians have become jobless since last year, with the first and second quarters of 2016, adding 2.6 million to unemployment figures of 1.46 million recorded in the third quarter of 2015 and 518,102 in the fourth quarter of 2015.
“During the reference period, the number of unemployed in the labour force increased by 1,158,700 persons, resulting in an increase in the national unemployment rate to 13.3% in Q2 2016 from 12.1 in Q1 2016, 10.4% in Q4 2015 from 9.9% in Q3 2015 and from 8.2% in Q2 2015,” NBS said.
“In view of this, there were a total of 26.06 million persons in the Nigerian labour force in Q2 2016 that were either unemployed or underemployed compared to 24.5 million in Q1 2016 and 22.6 million in Q4 2015”.
“The total value of capital imported into Nigeria in the second quarter of 2016 was estimated to be $647.1 million, which represents a fall of 8.98% relative to the first quarter, and a fall of 75.73% relative to the second quarter of 2015.
“This provisional figure would be the lowest level of capital imported into the economy on record, and would also represent the largest year on year decrease. This would be the second consecutive quarter in which these records have been set.
“The continuing decline in the value of capital imported into the economy is symptomatic of the difficult period that the Nigerian economy is going through.”
It is the worst economic recession in 29 years.
Reacting to the NBS statistics, Mrs Adeosun said: “It’s the worst possible time for us. Are we confused?
Absolutely not. How are we going to get ourselves out of this recession? One, we must make sure that we diversify our economy. There are too many of us to keep on relying on oil.
“We can see what happened at the output data of the oil and gas sector. What’s happening in the Niger Delta has dragged down the GDP of the entire economy. We’re too dependent on oil whereas 87 per cent of our GDP is oil. So let us drive those other areas.”
In her view, “we have to invest in capital projects”.
She went on: “No, we are not confused, the time are confusing but we are not confused. We are extremely focused. We know that if we can just bear and get through this difficult period, Nigeria is going to be better for it.
“If we rely on oil and the price of oil remains low and the quantity of oil remains low, we can’t grow. We have to grow our non-oil economy. I think we have a long way to go.
“We’re not confused and we’re not deceiving ourselves that everything is rosy. It’s not. It’s a difficult time for Nigeria but I think Nigeria is in the right hands and if we can stick with our strategy. We still have some adjustments to make. I think we need to make some adjustments in monetary policy. It’s quite clear we do and we will do that. We’re working on that. We need to try and find a way to support the manufacturing sector better and we will do that.”
According to Mrs Adeosun, the high inflation rate in the country is cost-pushed.
“And when you have cost-push inflation, it is structural inflation. It is not going to respond to monetary policy tools such as increasing the rate of interest. We have to address the structural causes of the inflation.”
But, she however said that the high rate of inflation has slowed down, which is a good sign for the economy.
The Presidency insisted that the outlook is indicative of a hopeful expectation.
A statement by the office of Vice President Yemi Osinbajo, quoting Dr. Adeyemi Dipeolu, the Special Adviser on Economic Matters to President Muhammadu Buhari, said: ”Apart from the growth recorded in the agriculture and solid mineral sectors, the Nigerian economy in response to the policies of the Buhari Presidency is also doing better than what the IMF had estimated, with clear indications that the second half of the year would be even much better.
The Buhari Presidency will continue to work diligently on the economy and engage with all stakeholders to ensure that beneficial policy initiatives are actively pursued and the dividends delivered to the Nigerian people.”
He added: “The just recently released data from the National Bureau of Statistics showed that Gross Domestic Product declined by -2.06% in the second quarter of 2016 on a year-on-year basis.
“A close look at the data shows that this outcome was mostly due to a sharp contraction in the oil sector due to huge losses of crude oil production as a result of vandalisation and sabotage.
“However, the rest of the Q2 data is beginning to tell a different story. There was growth in the agricultural and solid minerals sectors which are the areas in which the Federal Government has placed particular priority.
“Agriculture grew by 4.53% in the second quarter of 2016 as compared with 3.09% in the first quarter. The metal ores sector showed similar performance with coal mining, quarrying and other minerals also showing positive growth of over 2.5%. Notably also, the share of investments in GDP increased to its highest levels since 2010, growing to about 17% of Gross Domestic Product.”
Despite the manufacturing sector not yet being out of the woods, Dipeolu said, it is beginning to show signs of recovery.
“The IMF had forecast a growth of -1.8% for 2016, however the economy is performing better than the IMF estimates so far. For the half year it stands at -1.23% compared to an average of -1.80% expected on average by the IMF.
“What is more, it is likely the second half will be better than the first half of 2016. This is because many of the challenges faced in the first half either no longer exist or have eased,” the statement added.