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Nigeria's Economy Officially Slides into Recession Under Buhari?
Posted by George on Mon 23rd May, 2016 - tori.ngNigeria has gone from being the largest economy in West Africa to being in recession in just a year following the policy direction of the current administration as insinuated by finance analysts.
Muhammadu Buhari
Nigeria may already be in recession as growth in Africa’s largest economy contracted in the first quarter of the year, the first time since 2004.
Gross Domestic Product (GDP) declined by 0.36 percent from a year earlier, the Abuja-based National Bureau of Statistics (NBS) revealed Friday, compared with growth of 2.11 percent in the previous three months.
Analysts had warned that the capital controls imposed by regulators, as well as the lack of policy direction by the new government which inhibited the flow of foreign investment, will inevitably lead the country on the path of an economic recession.
A recession is defined as two consecutive quarters of negative growth.
“One more quarter of negative growth, we’ll officially be in recession,” said Oluwatosin Ojo, equity research analyst at Cardinal Stone Partners, in an emailed note to BusinessDay.
“This negative GDP growth figure may substantiate the rumor of a currency adjustment at next week’s MPC meeting, especially as the sector largely responsible for the decline is manufacturing (down by 7%) – remember that the Manufacturers Association of Nigeria has been lamenting on the impact of FX restriction on their sector,” said Ojo.
Nigerian President Muhammadu Buhari, placed foreign exchange restriction on 41 items, a policy that resulted in capital flight, crimped production output and led to the naira dropping to a record low on the alternative market.
Foreign-exchange trading restrictions and import curbs have also led to shortages of goods from gasoline to milk and contributed to the contraction in factory output in the quarter.
“We have one more month to evade a recession, and that’s just not going to happen. Let’s not fool ourselves,” Bismarck Rewane, chief executive officer of Lagos-based consultancy Financial Derivatives Co., said.
Gross Domestic Product (GDP) declined by 0.36 percent from a year earlier, the Abuja-based National Bureau of Statistics (NBS) revealed Friday, compared with growth of 2.11 percent in the previous three months.
Analysts had warned that the capital controls imposed by regulators, as well as the lack of policy direction by the new government which inhibited the flow of foreign investment, will inevitably lead the country on the path of an economic recession.
A recession is defined as two consecutive quarters of negative growth.
“One more quarter of negative growth, we’ll officially be in recession,” said Oluwatosin Ojo, equity research analyst at Cardinal Stone Partners, in an emailed note to BusinessDay.
“This negative GDP growth figure may substantiate the rumor of a currency adjustment at next week’s MPC meeting, especially as the sector largely responsible for the decline is manufacturing (down by 7%) – remember that the Manufacturers Association of Nigeria has been lamenting on the impact of FX restriction on their sector,” said Ojo.
Nigerian President Muhammadu Buhari, placed foreign exchange restriction on 41 items, a policy that resulted in capital flight, crimped production output and led to the naira dropping to a record low on the alternative market.
Foreign-exchange trading restrictions and import curbs have also led to shortages of goods from gasoline to milk and contributed to the contraction in factory output in the quarter.
“We have one more month to evade a recession, and that’s just not going to happen. Let’s not fool ourselves,” Bismarck Rewane, chief executive officer of Lagos-based consultancy Financial Derivatives Co., said.
“We’ve had strikes, petrol queues, and disruption of oil production, all showing we’re headed to another negative quarter.”
Buhari has resisted calls from investors to devalue the naira, which has been pegged at 197-199 per dollar for more than a year after oil price dropped significantly by more than 60 percent from over $100 per barrel in mid-2014.
Buhari has resisted calls from investors to devalue the naira, which has been pegged at 197-199 per dollar for more than a year after oil price dropped significantly by more than 60 percent from over $100 per barrel in mid-2014.
Source: BusinessDay
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