10 Things You Should Know About The Recession In Nigeria

10 Things You Should Know About The Recession In Nigeria

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Nigeria, the second largest economy in Africa, has a population of 167 million people making it the most populous country on the continent. The West African nation is also the second-top producer of oil in Africa, after Angola. It has been in an economic crisis since 2014 and slipped into a recession this year.

Below are 10 things to know about the economic recession in Nigeria.

Sources; BBC, Bloomberg, Reuters, Business Insider, Reuters, Vanguard News, Financial Watch, The Guardian, CNBC, Quartz Africa

Oil prices have dropped globally after OPEC refused to cut supply. (photo courtesy of  presstv.ir)
Oil prices have dropped globally after OPEC refused to cut supply. (photo courtesy of presstv.ir)

Oil prices slide

The global fall in oil prices in mid-2014 pushed the economy into crisis. Oil is Nigeria’s leading export commodity and accounts for about 70 percent of the country’s annual budget. The fall in prices was compounded by militant attacks on its oil-rich Niger Delta region. The militants damaged Chevron offshore facility and an underwater Forcados export pipeline.


Investor fears

Nigeria received a record decline of capital importation as investor fears grew due to the recession. In the second quarter of the year, the country recorded a $647.1 million in capital importation, a fall of about 75.7 percent for a similar period in 2015.

81952911 Lagos, Nigeria traffic
Lagos, Nigeria traffic. Getty

Full blown recession

The economy entered into a recession in August, after two quarters of the year where it contracted. During the first quarter, Gross Domestic Product shrank by 0.36 percent while in the second quarter, it shrank by 2.06 percent. The International Monetary Fund (IMF) also predicted the economy to shrink by 1.8 percent this year.


Naira performs dismally

Naira, the national currency, hit an all-time record low of 350 against the dollar in August. And it’s still falling.

Image: elombah.com
Image: elombah.com

Crisis in black market

The national currency has struggled in the country’s booming black market. In September, it fell to a record low of 420 against the dollar.

Photo: Naija247news.com
Photo: Naija247news.com

Banking crisis

This has been one of the hardest hit sectors of the economy. In October, failed fiscal and monetary policies have lead the sector into a credit crunch. There are at least seven under-capitalized banks, with deficits of as high as $3.2 billion. First Bank of Nigeria is the most under-capitalized lender.

Nigeria is Officially In Recession
Nigerian Finance Minister Kemi Adeosun. Photo: premiumtimesng.com

Ballooning budget

Africa’s biggest economy approved a record budgetary allocation of $30.6 billion in efforts to stimulate growth as the nation faces its worst economic crisis in years.

Break Up Nigeria
President Buhari, Nigeria (Image: dailypost.ng)

Sale of state assets

In September, the federal government finalized plans to sell its shares in the Nigeria Liquefied Natural Gas (NLNG) and Joint Venture Companies (JVCs). They included four oil refineries in Kaduna, Wari and Port Harcourt. The move aims to raise $15 billion to raise money to boost its ailing economy. Experts however cautioned against the move, saying the move offers short-term solutions while the nation needs to diversify its exports to reduce over-reliance on oil.

Nigeria's President Buhari boards one of his presidential jets (Photo: naij.com)
Nigeria’s President Buhari boards one of his presidential jets (Photo: naij.com)

Presidency leads in austerity move

The presidency put up two jets for sale in October in efforts to reduce waste of public funds. The two, falcon 7X valued at $53.8 million and a Hawker 4000 worth $22.9 million are expected to raise about $50 million (N20 billion).

Dangote Cement plans to list
Aliko Dangote. Photo: independent.co.uk

Dangote called for asset-sale

Aliko Dangote, Africa’s richest man and owner of the Dangote Group — the leading conglomerate, in West Africa called on the government to sell some of its assets to offset the crisis. He added that the move would be better than borrowing from the International Monetary Fund (IMF) or World Bank.