Lagos Chamber of Commerce and Industry has 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, 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.

“Given the protraction of the Covid-19 pandemic and lack of a vaccine, there is high possibility that the economy would contract, though marginally, in the third quarter and this would mark the second recession under the watch of the current administration. It is imperative to ensure effective synchronisation of fiscal and monetary policies and proper implementation of the sustainability plan among other measures.  The structural bottlenecks to productivity in the economy needs to be urgently removed through a mix of fiscal, monetary and regulatory measures.  It is imperative to reduce policy uncertainties in order to inspire the confidence of investors, both domestic and foreign. This would give the economy a boost in the near term. However, growth will continue to remain weak and fragile till the first quarter of 2021”. 

“The 6.1 per cent contraction is not a surprise as the number reflects the profound impact of the covid-19 pandemic on the Nigerian economy. The containment measures including lockdown, national curfews, inter-state travel bans, closure of schools, airlines, businesses imposed globally and domestically to slow the spread of the pandemic, significantly disrupted global supply chains and destabilised commercial, business, investment, and trade activities. In addition to these, it was also in the second quarter that the country was confronted with weakening oil prices, low crude production, huge volume of unsold crude cargoes, foreign exchange scarcity, depleting external reserves, portfolio outflows in the financial markets, disruption & adjustment of the 2020 budget, revenue collapse from oil and non-oil sources, rising spate of job losses, high food prices, among others. We note the weak performance of the economy at sectoral level, particularly among critical sectors with potentials to facilitate economic diversification. While some sectors did expand in the second quarter, most of the sectors that reported positive growth in the first quarter plunged into sharp contraction while others maintained their position in recessionary territory.

The National Bureau of Statistics (NBS) had in its report of the second quarter 2020 said that says Nigeria’s Gross Domestic Product (GDP) decreased by -6.10 per cent (year-on-year) in real terms in the second quarter of 2020. This is according to the Nigerian Gross Domestic Product Report (Q2 2020) published on the NBS website. The report said that the decrease in GDP ended the three-year trend of low but positive real growth rates recorded since the 2016 and 2017 recession. The decline was largely attributed to significantly lower levels of both domestic and international economic activities during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19 pandemic. The domestic efforts ranged from initial restrictions of human and vehicular movement implemented in only a few states to a nationwide curfew, bans on domestic and international travel, closure of schools and markets, among others. These efforts, according to NBS, affected both local and international trade.

The efforts, led by both the Federal and State governments, evolved over the course of the quarter and persisted throughout. When compared with the second quarter of 2019, which recorded a growth of 2.12 per cent, the second quarter of 2020 growth rate indicated a drop of –8.22 per cent points. The rate also showed a fall of –7.97 per cent points compared to the first quarter of 2020 (1.87 per cent). Consequently, for the first half of 2020, real GDP declined by –2.18 per cent year on year, compared with 2.11 per cent recorded in the first half of 2019. Quarter on quarter, real GDP decreased by –5.04 per cent. Furthermore, only 13 activities recorded positive real growth compared to 30 in the preceding quarter. In the quarter under review, aggregate GDP stood at N34,023 million in nominal terms, or -2.8 per cent lower than the second quarter of 2019 which recorded an aggregate of N35,001,877.95 million. Overall, the nominal growth rate was –16.81 per cent points lower than recorded in the second quarter of 2019, and –14.81 per cent points lower than recorded in the first quarter of 2020.

According to the report, the Nigerian economy has been classified broadly into the oil and non-oil sectors. An average daily oil production of 1.81 million barrels per day (mbpd) was recorded in the second quarter of 2020. This was -0.21mbpd lower than the daily average production of 2.02mbpd recorded in the same quarter of 2019, and –0.26mbpd lower than the first quarter of 2020 production volume of 2.07mbpd. Real growth of the oil sector was –6.63 per cent (year-on-year) in the second quarter of 2020 indicating a decrease of –13.80 per cent points relative to the rate recorded in the corresponding quarter of 2019. Growth decreased by –11.69 per cent points when compared to the first quarter of 2020 which recorded 5.06 per cent. Quarter-on-Quarter, the oil sector recorded a growth rate of –10.82 per cent in the second quarter of 2020. The oil sector contributed 8.93 per cent to total real GDP in the second quarter of 2020, down from figures recorded in the corresponding period of 2019 and the preceding quarter, where it contributed 8.98 per cent and 9.50 per cent respectively.

Furthermore, the non-oil sector declined by –6.05 per cent in real terms in the second quarter of 2020 which was the first decline in real non-oil  GDP growth rate since the third quarter of 2017.

The recorded growth rate was –7.70 per cent points lower compared to the rate recorded during the same quarter of 2019, and –7.60 per cent points compared to the first quarter of 2020.

Nevertheless, non-oil sector output was driven by financial and insurance (financial institutions), information and communication (telecommunications), agriculture (crop production), and public administration which moderated the economy-wide decline. On the other hand, sectors which experienced the highest negative growth included transport and storage, accommodation and food services, construction, education, real estate and trade, among  others. In real terms, the non-oil sector accounted for 91.07 per cent of aggregate GDP in the second quarter of 2020. The figure is slightly higher than the share recorded in the second quarter of 2019 which was 91.02 per cent and also the first quarter of 2020 which was 90.50 per cent.