Africa’s largest economy has entered its second recession in less than five years, battered by falling oil prices caused by the coronavirus pandemic.
As Nigeria’s crude oil production fell to its lowest level in four years, gross domestic product contracted 3.6% in the three months to September, after declining 6.1 % in the previous quarter, according to official data released on Saturday.
Two consecutive quarters of economic contraction mean that Africa’s largest crude producer has officially slipped into recession. He had barely started to recover from the recession that followed the fall in oil prices in 2015.
The IMF has forecast Nigeria’s economy to contract 4.3% this year, the sharpest contraction in nearly 40 years.
More than half of Nigerians are unemployed or underemployed, and inflation and food prices are skyrocketing.
The Central Bank of Nigeria is expected to begin its two-day monetary policy meeting on Monday, after a surprise 100 basis point cut in September aimed at supporting the economy.
The economic situation remains dire. A shortage of dollars is hitting the private sector, which must import almost all of its raw materials and equipment, while oil production has fallen to 1.67 million barrels per day from 1.81 million barrels per day the previous quarter.
Gross receipts provide nearly 90% of Nigeria’s foreign exchange and around half of government revenue, which has fallen even as the government has to increase funding for health care and social services in the face of the coronavirus pandemic.
The recession rekindled memories of 2016, when critics said President Muhammadu Buhari’s administration exacerbated an economic crisis sparked by the oil crash through policies such as maintaining multiple exchange rates.
The central bank took further steps this year to unify its exchange rates and devalued the naira by 20 percent, the World Bank, IMF and many economists urged.
The government has also used the crisis created by the pandemic to take steps towards enacting a series of key reforms that have long been considered essential to promote sustainable growth.
These include accelerating key oil industry reforms that have been underway for two decades, removing a costly fuel subsidy that costs the government billions of dollars each year, increasing VAT and revamping the electricity tariff which had made the electricity sector unprofitable.