Nigerian economy falls into recession, first time in 20 years
The crisis was compounded by President Muhammadu Buhari's unorthodox decision to prop up the naira at 197-199 to the dollar causing foreign currency reserves to tank. Photograph: (Getty)
The gross domestic product of the country has fallen by 2.06 per cent after shrinking 0.36 in the first quarter, the Nigerian Bureau of Statistics (NBS) said today.
While non-oil sector declined due to a weaker currency, lower prices dragged the oil sector down, the NBS further stated.
The oil sector has announced a double-digit decline after rebels attempted a series of attacks in Southern Nigeria, AFP reported.
During the oil boom, sales of oil at high prices had made Nigeria the biggest economy in Africa, the AFP report says.
But when the price of crude crashed from more than $100 a barrel in June 2014 to below $50 today, Nigeria's economy collapsed.
The crisis was compounded by President Muhammadu Buhari's unorthodox decision to prop up the naira at 197-199 to the dollar causing foreign currency reserves to tank.
A slump in crude prices, Nigeria's mainstay, has hammered public finances and the naira currency, causing chronic dollar shortages. Crude sales account for around 70 per cent of government revenues.
"The Nigerian economy contracted more deeply than we had expected in the second quarter," said Razia Khan, chief economist, Africa at Standard Chartered bank.
"With a wider current account deficit it remains important for Nigeria to maintain a credible policy response, in order to attract much-needed stabilising inflows," she added.
International investors are now having second thoughts about putting money into the country, which has led to a fall in import of capital, as reported by NBS.
"It's really, really grim," John Ashbourne, Africa economist at research firm Capital Economics, told AFP.
"Investors want to see some direction from Buhari, there is a sense that the policies they have implemented so far aren't working," said Ashbourne, in a telephone interview from London.
"Nigeria is very dependant on foreign investment to improve the infrastructure and get the economy back on track, we need investor confidence," he said.
"People are staying away because they don't have any faith that things are turning around."
The Nigerian government, however, is optimistic about the year.
"It is likely the second half will be better than the first half of 2016," said presidential economic advisor Adeyemi Dipeolu in a statement.
"As the emphasis on capital expenditure begins to yield results... the growth rate of the Nigerian economy is likely to improve further."
(WION with inputs from agencies)