Figures released recently by the National Bureau of Statistics (NBS), indicate that the Nigerian economy has slipped into a recession.
The NBS report stated that the nation’s Gross Domestic Product, (GDP) contracted by -3.63 per cent in the third quarter of this year which follows a similar one in the second quarter of this year which cumulatively translates into a recession in the Nigerian economy.
Although this can hardly be welcome news, it is however not unexpected.
As the report of the NBS further reveals , ‘‘the performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in the early Q2 in response to the COVID-19 pandemic….’’
It is also instructive that Nigeria is not alone in recording this negative economic development. It is a global phenomenon which has affected many countries including prominently, the developed ones as a result of the drastic reduction in industrial production, trade and commerce following the pandemic.
An analysis of the NBS report also shows a mixed bag of performance.
A total of 18 economic activities recorded positive growth in Q3 2020 compared to the 13 in Q2 2020. Also the aggregate GDP was N39.09 trillion Q3 2020 which represents a 3.39 percentage rise when compared to the N37.81 trillion recorded in the corresponding period in 2019.
In the report also, developments in the oil sector which accounts for the overwhelming source of revenue in the country did not show encouraging results on the whole.
Average daily crude oil production was 1.67 million barrels per day (mbpd) during Q3 2020 which is lower by 0.37 mbpd production rate recorded in the corresponding quarter in 2019. The report further showed that the oil sector contributed 8.73 per cent to total GDP during the quarter which is down from the 9.77 per cent and 8.93 per cent recorded respectively in the corresponding period in 2019 and in Q2 2020.
The encouraging news in the report is that as the oil sector which has been the bedrock of the nation’s revenue is showing signs of decline, the non-oil sector appears to be picking up the slack. According to the NBS report, this sector grew by 2.51 per cent in real terms which is 3.54 per cent higher than in Q2 2020. Cumulatively in real terms the non-oil sector contributed 91.27 per cent of the nation’s GDP in the period under review.
The NBS report identified Information and Communication, Agriculture, Construction, Financial and Insurance and Public Administration as the drivers of the growth in the non-oil sector.
It is gladdening that in the midst of this economic downtown, the federal government has assured workers that salaries would be paid in full when due and that there would be no retrenchment. But conversely the news coming from the states are not so assuring. Some states already owing workers’ salaries running to months are threatening to either cut the salaries or reduce the workforce. In the desperate economic circumstances rather than embark on this course of action, governors should consider cutting overhead costs like the retinue of aides they keep and other expenses. Indeed government at all levels must consider the recession as an occasion to cut down on all unnecessary expenditure that do not help efforts at economic recovery in the short and medium term and overall national economic development in the long run.
All considered we call on the federal government to regard the recession as an opportunity to begin the necessary process of concretizing the much needed diversification of the economy. We simply cannot continue to rely on a volatile commodity like crude oil which is increasingly becoming surplus to requirements both as an energy source and as foreign exchange earner.
As we take encouragement in the fact that the non-oil sectors of the economy are beginning to grow in strength, we must note that they deserve great support by way of massive investment and enabling policies for further growth.
