The latest report from the National Bureau of Statistics for 2nd Quarter 2020 (Q2 2020) shows that the Nigeria’s Gross Domestic Product (GDP) decreased by -6.10%(year-on-year) in real terms, and aggregate GDP stood at N34,023,197.60 million in nominal terms.
The Q2 2019 GDP recorded a growth of 2.12%, the Q2 2020 growth rate of -6.10% indicates a drop of -8.22% points, and on quarter-on quarter basis, a fall of -7.97% points when compared to the first quarter of 2020 (1.87%).
Overall, the nominal growth rate was -16.81% points lower than recorded in the second quarter of 2019, and -14.81% points lower than recorded in the first quarter of 2020.
- Regarding the oil sector, real growth stood at -6.63% (year-on-year) in Q2 2020 indicating a decrease of -13.80% points relative to the rate recorded in the corresponding quarter of 2019. Growth decreased by -11.69% points when compared to Q1 2020 which recorded 5.06%. The Oil sector contributed 8.93% to total real GDP in Q2 2020. In the second quarter of 2020, an average daily oil production of 1.81 million barrels per day (mbpd) was recorded. This was -0.21mbpd lower than the daily average production of 2.02mbpd recorded in the same quarter of 2019, and -0.26mbpd lower than the first quarter 2020 production volume of 2.07mbpd.
- The non-oil sector recorded a decline of -6.05% in real terms during the reference quarter (Q2 2020). The recorded growth rate was -7.70% points lower compared to the rate recorded during the same quarter of 2019, and -7.60% points compared to the first quarter of 2020. The sector under consideration, accounted for 91.07% of aggregate GDP in the second quarter of 2020, slightly higher than the share recorded in the second quarter of 2019 (91.02%) as well as the first quarter of 2020 (90.50%).
- The agricultural sector grew by 19.90% year-on-year in nominal terms in Q2 2020, showing an increase of 2.14% points from the same quarter of 2019. Crop Production remained the major growth driver of the sector, as it accounted for 87.34% of nominal GDP in the sector in Q2 2020.
- According to the NBS, “The decline was largely attributable to significantly lower levels of both domestic and international economic activity during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19 pandemic”. While we agree that the COVID-19 has adversely impacted businesses globally and in Nigeria, the level of impact would have been minimized if the Nigerian environment was more business friendly in terms of infrastructure (power and access road) among other points.
- The GDP contraction of -6.10% puts to an end 3 years of a weak but positive GDP growth rate. On account of this result, we can expect that the Q3 2020 would record a negative growth and putting Nigeria in a recession (resulting from 2 quarters of negative gdp).
- In the period under consideration, only 13 sub-sectors recorded positive growth as compared to the 30 sub-sectors that recorded positive growth in the preceding quarter. Most of the growth was from the agriculture sub sector which speaks well of the initiative of government of Nigeria towards the agric sector.
With a recession in sight, the government needs to as a matter of urgency, create fiscal stimulus to the real sector, most especially the sectors with higher impact from the Covid-19 lockdown. The CBN at this time would need to put funds through the commercial banks into critical sectors of the Nigerian economy by reducing lending rates.
The subject of unconditional cash transfers to sectors like the hospitality, and tourism sector at this point cannot be overemphasized.
While at that, it is also important to bridge the infrastructure gap. We have seen the railway projects to help transportation of goods and services, but more focus should be on power as over 50% of business cost on the average goes in power generation independent of the grid.