Despite reports from Bloomberg with headline “IMF Says Nigeria’s Economy May Contract by 1.8% This Year” and with the TheNational Bureau of Statistics (NBS)said Nigeria’sGross Domestic Product (GDP)in real terms declined by 2.06% in second quarter of 2016, the Presidency Expecting Better Economic Outlook in 2nd Half of the Year.
The Nigerian economy will contract for the first time in more than two decades asit “adjusts to foreign-currency shortages as a result of lower oil receipts, lower power generation and weaker investor confidence,” the IMF said.
The gross domestic product dropped by 4 percent after oil prices slumped and its output slumped, approval of spending plans delayed.
Foreign-exchange trading restrictions, which were removed last month after more than a year caused shortages from gasoline to milk helping in the contraction of the economy.
President Muhammadu Buhari signed a record budget of 6.1 trillion naira ($21.35 billion) in May, more than four months into the fiscal year. “It’s half way through 2016 and very little has been done in terms of spending,” Pabina Yinkere, head of research at Lagos-based Vetiva CapitalManagement Ltd., said by phone. “The revenue challenge facing the government will continue to constrain its ability to reflate the economy this year.”
A press statement signed by the Senior Special Assistant-Media & Publicity to the Vice President, Laolu Akande.
*2nd quarter figures indicate further growth in Agric, solid mineral sectors: Better than IMF estimates
*Reveals highest increase in share of investment in GDP since 2010.
*Presidency Expecting Better Economic Outlook in 2nd Half of the Year
The just released GDP figures for the 2016 second quarter by the National Bureau of Statistics while confirming a temporary decline, has also indicated an hopeful expectation in the country’s economic trajectory.Besides the growth recorded in the agriculture and solid mineral sectors, the Nigerian economyin response to the policies of the Buhari presidency is also doing better than what the IMF had estimated with clear indications that the second half of the year would be even much better.
The Buhari presidency will continue to work diligently on the economy and engage with all stakeholders to ensure that beneficial policy initiatives are actively pursued and the dividends delivered to the Nigerian people.
Dr Adeyemi Dipeolu, Special Adviser to the President on Economic Matters made this statement on the report:
“The just recently released data from the National Bureau of Statistics showed that Gross Domestic Product declined by -2.06% in the second quarter of 2016 on a year-on-year basis.
A close look at the data shows that this outcome was mostly due to a sharp contraction in the oil sector due to huge losses of crude oil production as a result of vandalisation and sabotage.
However, the rest of the Q2 data is beginning to tell a different story. There was growth in the agricultural and solid minerals sectors which are the areas in which the Federal Government has placed particular priority.
Agriculture grew by 4.53% in the second quarter of 2016 as compared with 3.09% in the first quarter. The metal ores sector showed similar performance with coal mining, quarrying and other minerals also showing positive growth of over 2.5%. Notably also, the share of investments in GDP increased to its highest levels since 2010, growing to about 17% of Gross Domestic Product.
The manufacturing sector though not yet truly out of the woods is beginning to show signs of recovery while the service sector similarly bears watching.
Nevertheless, the data already shows a reduction in imports and an increase in local produced goods and services and this process will be maintained although it will start off slowly in these initial stages before picking up later.
The inflation rate remains high but the good news is that the month-on-month rate of increase has fallen continuously over the past three months.
Unemployment remains stubbornly high which is usually the case during growth slowdowns and for reasons of a structural nature.
The picture that emerges, barring unforeseen shocks, is that the areas given priority by the Federal Government are beginning to respond with understandable time lags to policy initiatives. Indeed, as the emphasis on capital expenditure begins to yield results and the investment/GDP numbers increase, the growth rate of the Nigerian economy is likely to improve further.
As these trends continue, the outlook for the rest of the year is that the Nigerian economy will beat the IMF prediction of -1.8% for the full year 2016.
The IMF had forecasted a growth of -1.8% for 2016, however the economy is performing better than the IMF estimates so far. For the half year it stands at -1.23% compared to an average of -1.80% expected on average by the IMF.
What is more, it is likely the second half will be better than the first half of 2016. This is because many of the challenges faced in the first half either no longer exist or have eased.”
In an interview two weeks ago Gene Leon, a fund representative in Nigeria said,
“The forecast of 1.8 percent probably assumes a downturn in the second half” Nema Ramkhelawan-Bhana Johannesburg-based Africa Analyst at Rand Merchant Bank, said by phone on Tuesday. “I think there will be sustained pressure from the oil economy, and its ripple effects to other sectors of the economy.”
Inflation in Nigeria reached an all time high of 16.5% percent, the highest in 11 years. The only thing more likely is that the second half of the year would be better the last half.
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