By Audrey Lotechukwu
SAT, 21 NOV, 2020-theGBJournal- Nigeria’s gross domestic product (GDP) growth rate shrank -3.62% (year-on-year) in real terms in the third quarter of 2020, according to data published today by the National Bureau of Statistics (NBS). The decline indicates two consecutive quarters of negative growth in 2020.
The NBS said 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.
The statistics office also noted that 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.
In April 2020, the IMF forecast GDP to contract by about as much as 3.4 percent in 2020, a 6-percentage point drop compared to pre-COVID-19 projections. The forecast was reviewed to 4.4% in October.
Nigeria’s economy remains highly reliant on foreign exchange proceeds and the recycling of petrodollars-(IMF). The impact of the COVID-19 pandemic on the economy has so far been quite telling on country’s main export commodity- oil, which represents about 90 percent of its exports. And the IMF projects that the country’s oil exports will fall by more than US$26 billion.
The risks to the growth outlook for the country remains, and the IMF baseline scenario is ‘’uncertain and subject to heightened risks.’’
‘’ These are mostly linked to a further collapse in oil revenue—due to persistent low oil prices, an inability to sell oil because of depressed global demand, or declining production because of additional OPEC-agreed cuts. Our growth outlook also assumes the COVID-19 spread in Nigeria is contained in the second half of 2020. If these measures fail to contain the virus or domestic infections rise, the economic recovery would be slower and gaps would become even larger,’’ the IMF said in their April Country Focus note.
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.
The drop in production volume may not be unconnected to pressure from OPEC and OPEC+ for quota compliance as the cartel battle to sustain stability in the market. Nigeria is one country in the cartel frequently fingered for non-compliance to production quota cap.
According to the NBS, Real growth for the oil sector was –13.89% (year-on-year) in Q3 2020, indicating a sharp contraction of -20.38% points relative to the rate recorded in the corresponding quarter of 2019. Real oil growth decreased by -7.26% points when compared with oil sector growth recorded in Q2 2020 (6.63%).
Quarter on quarter however, the oil sector recorded a growth rate of 9.64% in Q3 2020. 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.
Meanwhile, the GDP growth in Q3 2020 was slower by 5.90% points when compared to the third quarter of 2019 which recorded a real growth rate of 2.28% year on year.
During the quarter under review, aggregate GDP stood at N39,089,460.61 million in nominal terms, 3.39% higher when compared to the third quarter of 2019 which recorded an aggregate of N37,806,924.41 million.
This rate was, however, lower relative to growth recorded in the third quarter of 2019 by –9.91% points but higher than the proceeding quarter by 6.19% points.
On the other hand, 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.
The non-oil sector growth was driven mainly by 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 91.27% 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%).