Nigeria has slipped into recession, with the latest growth figures showing the economy contracted by 2.06% between April and June. The country has now seen two consecutive quarters of declining growth, the usual definition of recession.
Its vital oil industry has been hit by weaker global prices, according to the Nigerian Bureau of Statistics. Crude oil sales account for 70% of government income, BBC reported.
The gross domestic product report from the NBS says Nigeria is in its worst economic recession in 29 years.
The price of oil has fallen from highs of about $112 a barrel in 2014 to below $50 at the moment.
Outside the oil industry, the figures show the fall in the Nigerian currency, the naira, has hurt the economy. It was allowed to float freely in June to help kick-start the economy, but critics argued it should have been done earlier.
Nigeria, which vies with South Africa for the mantle of Africa’s biggest economy, is also battling an inflation rate at an 11-year high of 17.1% in July.
“A lot of Nigeria’s current predicament could have been avoided,” said Kevin Daly from Aberdeen Asset Management.
“The country is so reliant on oil precisely because its leaders haven’t diversified the economy.
“More recently, they have tried, and failed, to prop up the naira, which has had a ruinous effect on the country’s foreign exchange reserves and any reputation it might have had of being fiscally responsible.”
Currency at Record Low
Hope that a devaluation of the naira would lure foreign investors back have been dashed by an ongoing dollar shortage in the official and parallel markets—and the view held by many analysts, bankers and investors that the central bank is still not allowing the currency to float freely more than two months after removing a currency peg.
The naira is trading at a record low in both the official foreign exchange market and in the widely-used parallel one. It was trading as low as 418 to the dollar on the parallel market this week. Central bank dollar sales supported the naira’s close at 305.50 on the interbank market on Tuesday, Reuters reported.
Muhammadu Buhari, the former military ruler who won elections last year, is facing growing pressure from critics who say his attempts to address the crisis are slow and faltering.The latest figures do not come as a surprise. Central bank Governor Godwin Emefiele warned in May that “recession was imminent”.
