Nigeria has exited recession after its economy saw marginal growth in the fourth quarter of 2020 bolstered by growth in agriculture and telecommunications, according to official data released.
Nigeria’s economy grew better than expected, after recording a GDP growth rate of 0.11% in the three months through December, according to Nigeria’s National Bureau of Statistics (NBS), compared with a decline of 3.6% in the third quarter, Bloomberg and Business Insider reported.
Nigeria slipped into recession after its gross domestic product contracted for the second conservative quarter for the first time since 2016. This was as a result of fragile growth occasioned by the COVID-19 pandemic due to low oil prices.
“The surprise rebound means Africa’s largest economy may recover faster than expected as the oil price and output increase this year. It could also point to the growing importance of the non-crude sector,” according to Bloomberg.
Nigeria’s economy is heavily dependent on oil cash. However, the oil sector contracted by 13.89 percent in the third quarter against the growth of 6.49 percent in the same period a year earlier, Aljazeera reported.
Oil production accounts for nearly all the foreign exchange earnings of Nigeria and half of government budget revenue. “The recovery is continuing, supported by easing OPEC production cuts and higher oil prices. That said, recurring waves of virus infection, naira devaluation, high inflation and ongoing foreign-exchange shortages will continue to pose risks,” according to Bloomberg economist Boingotlo Gasealahwe.
The NBS attributed the recession to the lockdown measures imposed by the Nigerian government after it confirmed the first case of COVID-19 may have contributed to sliding into recession in the third quarter of 2020.
“The performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the COVID-19 pandemic,” the statistics office said.
“As these restrictions were lifted, businesses reopened and international travel and trading activities resumed, some economic activities have returned to positive growth.”
According to the IMF, despite the marginal positive growth in the fourth quarter, the economic situation in Nigeria remains challenging. “Vulnerabilities in the banking sector are rising. Low tax revenues are keeping the fiscal deficit high, leading to more government borrowing that is crowding out private sector activity. Distortions in foreign exchange markets are slowing efforts to attract longer-term investment and diversify the economy,” the IMF said.
The IMF further said Nigeria needs to forcefully address these challenges so that it can provide enough jobs for its young people in the years ahead.