[Sucker Punch!] National Bureau of Statistics condemns Buhari. Nigeria's economic recession worse than expected

[Sucker Punch!] National Bureau of Statistics condemns Buhari. Nigeria's economic recession worse than expected 

The National Bureau of Statistics (NBS) has given  the 'General Muhammadu Buhari's tyrannical junta a sucker punch. The NBS yesterday released key indices of the economy which showed that the Nigerian economy at the point of death. Nigeria’s economy came under renewed tension as fresh reports on key fundamentals, including Gross Domestic Product, GDP; inflation, employment/ unemployment, capital importation, among others, were worse than expected.



NBS stated from available evidence that Nigeria’s GDP at constant basic prices, contracted in the second quarter 2016 (Q2’16) by 2.06 per cent after shrinking 0.36 in Q1’16. It said the non-oil sector declined due to a weaker currency, while lower prices dragged the oil sector down.

A slump in crude prices, Nigeria’s mainstay, has depressed public finances and the value of the Naira, causing foreign exchange shortages. Crude sales account for about 70 per cent of government revenues.

But the Presidency has allayed the fears of Nigerians that the sharp drop in GDP, which had plunged the country into economic recession would not persist. Compounding the impact of low oil prices, attacks by militants on oil and gas facilities in the southern Niger Delta hub, since the start of the year, has cut crude production by about 700,000 barrels per day (bpd) to 1.56 million bpd, against government’s 2016 budget assumption of 2.2 million bpd.

You have FAILED! Resign now!! Go. . .go. . .go!!! PDP tells Buhari

The statistics office said that annual inflation reached 17.1 per cent in July from 16.5 per cent in June, which is more than 10-year high, while food inflation rose to 15.8 per cent from 15.3. Nigeria’s sovereign dollar bonds fell across the curve to their lowest value in more than two weeks after the NBS released its data.

The NBS figures showed Nigeria attracted just $647.1 million of capital in the second quarter, a 76 per cent fall year-on-year and 9 per cent down from the first quarter. Nigeria’s economy was last in recession, for less than a year, in 1991, NBS data shows. It also experienced a prolonged recession from 1982 until 1984.

The naira remained at record low of N423 per dollar in the black market, as dollar shortages curb activity on the official inter-bank market where the currency was offered at rates as weak as 365.25 this month before gaining ground after Central Bank’s interventions. The oil sector, the NBS said, contracted by -17.5 per cent year-on-year, compared with -1.9 per cent in the first quarter of 2016.

The non-oil sector contracted by -0.4 per cent year-on-year, compared with a contraction of -0.2 per cent recorded in the first quarter 2016. For the non-oil economy, manufacturing contracted by -3.4 per cent, compared with -7.0 per cent in the first quarter of 2016. The slower contraction is attributed to base effects as foreign exchange sourcing issues are biting hard on manufacturers and power shortage was at its peak in the second quarter.

Experts react to the NBS data

FBNCapital said: 

“There are no major surprises in this release as we expected a contraction in the second quarter of the year.

“Given the macro challenges, steep slide in oil prices, production shortages due to vandalism, foreign exchange sourcing issues in an import dependent country and hike in inflation, the negative reading was a foregone conclusion.

“Technically, given that Nigeria’s GDP has now showed a decline for two consecutive quarters, the economy is in recession. “Although we expect to begin to see signs of recovery as we enter the fourth quarter, there is still a lot of work to do and delays in releasing capital vote could also delay the recovery.

“There is also a risk that revenue collection shortfalls may lead to capital expenditure cuts. Our 2016 GDP growth forecast is -1.2 per cent FBNCapital.”


Also reacting to the developments, Razia Khan, Chief Economist, Africa at Standard Chartered Bank, said:

“The Nigerian economy contracted more deeply than we had expected in the second quarter. “With a wider current account deficit, it remains important for Nigeria to maintain a credible policy response in order to attract the much-needed stabilising inflows.”

Officially in a recession – what next? 
Analysts at CardinalStone Partners, a Lagos-based investment house, said: “With the improvement seen in the real output of a number of sub-sectors in the manufacturing sector (food, beverage & tobacco, textile, apparel and footwear production) and the slowdown in the rate of decline of financial services sector’s real output), we believe there’s some respite ahead as recent policy changes in Q2’16 (removal of subsidy and foreign exchange liberalization) may be working.

“However, in our view, these policies need to be complemented by an aggressive fiscal-side stimulation, including swift budget implementation and increase in foreign exchange supply.

“Also, the contraction in oil sector GDP which weighed very negatively on overall GDP must be addressed promptly so the benefit of a relatively higher oil price can reflect on our fiscal position.

“A decisive, immediate fiscal action on improving foreign exchange supply is important to complement monetary policy and ease interest rates, as current high interest rate on government treasuries is counterproductive for real sector growth.

“With just a month left in Q3’16, we are cautiously optimistic and, at best, expect real output to be flat. However, if significant progress is achieved in Q3’16, we may see positive real GDP growth in Q4’16”.

The economy as a whole expanded 0.8 per cent, compared with the previous quarter, according to NBS. That means Nigeria avoided a technical recession, Cobus de Hart, an analyst at NKC African Economics in Paarl, outside Cape Town, said. But John Ashbourne, an economist at London-based Capital Economics Ltd., said: “Every engine has blown out.” The key point from today’s data is that there was a very poor performance across almost the entire economy.”.

While the government planned to stimulate the economy with a record N6.1 trillion budget this year, it delayed approving the spending plans as President Muhammadu Buhari haggled with lawmakers over allocations. The government collected N1.16 trillion in revenue, or about half of what it expected, in the second quarter compared with N1.27 trillion in the previous three months, the central bank said in a report. Reacting on the basis of the constrained revenue and fiscal measures, Alan Cameron, an economist at Exotix Partners LLP, said: “There is a limit to what the federal government, with its limited tax collections and expenditures can really do at an economy-wide level. One obvious area of improvement would be the power sector.”

The slump in oil, the nation’s biggest revenue earner, as well as shortages of foreign currency and power, could cause the economy to shrink 1.8 per cent this year, according to the International Monetary Fund. Ridle Markus, an Africa strategist at Barclays Plc’s unit in Johannesburg, said: “We are likely to see better growth numbers coming through in the third and fourth quarters, but it’s unlikely to make up for the really poor performance of the first half of the year.”