Federal government of Nigeria expects that the third and fourth quarters of 2020 Gross Domestic Product will be worse than the result of the second quarter.
The report is expected to reflect the continued effects of a slowdown, after the economy contracted by 6.1 per cent in the second quarter, the presidency has said. Nigeria, Africa’s largest economy and top oil producer, faces its worst crisis in four decades due to low crude prices, and the impact of the novel coronavirus pandemic, which hurt demand for its main export commodity.
“It is anticipated that while the third and fourth quarters will reflect continued effects of the slowdown, the fiscal and monetary policy initiatives being deployed by government in a phased process will be a robust response to the challenges posed by the COVID-19 pandemic,” said a statement issued by the presidency. Policymakers face a raft of challenges. Inflation 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.
Nigeria’s economy was already grappling with sluggish growth before the pandemic following a 2016 recession. The International Monetary Fund has said it sees Nigeria’s GDP falling 5.4% this year, while the government has said the economy may shrink by as much as 8.9%.
Lagos Chamber of Commerce and Industry had expressed deep concern over the 6.1 per cent contraction in the Nigerian Economy. Reacting to the report of the second quarter 2020 GDP report the Chamber said that in all, 46 sectors of the Nigerian economy, 19 sectors contracted; 14 sectors are in recession, 11 sectors expanded, and two sectors reported slowdown in growth.
According to LCCI “the economy contracted by a record 6.1 per cent in the second quarter, and this marks the steepest quarterly contraction in Nigeria’s recent economic history. The contraction in Q2-2020 also ended the three-year trend of marginal but positive growth era the Nigerian economy had after exiting recession in Q2-2017.
According to LCCI “The Nigerian economy is currently in dire straits. Apart from the urgent need for policymakers to reflate the economy, it is critically important for policymakers to also tackle the twin challenge of rising inflation and unemployment rates. With inflation and unemployment at record high of 12.82% and 27.1% respectively.
We note that the fiscal and monetary authorities have implemented several policies to mitigate the adverse impact of the covid-19 shock on the economy and business environment. Noteworthy is the Nigerian Economic Sustainability Plan, which proposes a N2.3 trillion stimulus package, equivalent to 1.5% of GDP. We acknowledge the commitment of government to support the economy and protect businesses.
Although there has been a gradual reopening of the economy, we note that business and commercial activities remain subdued, evidenced by July PMI readings which shows business activities is still in the recessionary threshold.