Nigeria's economy shrinks 6% in second quarter on oil crash, pandemic double whammy

Nigeria's economy contracted by 6.1% in the second quarter of 2020 from a year earlier, the statistics office said on Monday, with lockdowns in its two main cities and low oil prices taking their toll.

The West African country - Africa's largest economy and the continent's top oil producer - reported its first coronavirus case in late February. Lockdowns were imposed for just over a month in the commercial hub Lagos and the capital Abuja, ending in early May.

"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," the statistics office said.

Crude oil production was 1.81 million barrels a day in the second quarter, compared with 1.98 in the same 2019 period. A global oil price crash due to reduced demand from the pandemic saw the oil sector shrink by 6.63% in the second quarter.

The non-oil sector declined by 6.05%, which the statistics said was the first decline in real non-oil GDP growth in nearly three years. 

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Nigeria's economy was already grappling with sluggish growth before the pandemic in the wake of a 2016 recession. The International Monetary Fund has said it sees Nigeria's GDP falling 5.4% this year, while the government expects the economy to shrink by as much as 8.9%.

"Given that lockdown measures have been loosened in recent months and oil prices have picked up, Q2 might be the trough of this year's recession in Nigeria," said John Ashbourne, global emerging markets economist at Fitch Solutions.

The World Bank has warned that Nigeria potentially faces its worst financial crisis in four decades due to the crash in oil prices and the pandemic. However, the bank is also unlikely to approve a much-needed $1.5 billion loan for Nigeria due to concerns over desired reforms, sources familiar with the talks told Reuters this month.

Inflation in Nigeria rose to 12.82% in July, its highest level in more than two years, and the unemployment rate stood at 27.1% in the second quarter, according to data released earlier this month.

Reuters