Economy to remain in recession as NBS forecasts -1.3% for 2016

The Nigerian economy is expected to remain in recession this year following a forecast by the National Bureau of Statistics (NBS) that it will likely shrink 1.3 per cent in 2016.

The NBS had predicted the Nigerian economy to grow 3.8 percent in 2016. However, low oil prices have not helped as revenue from oil continues to nosedive largely due to attacks by militants in the Niger Delta on oil installations and the Naira fall against dollar as recession appeared in the second quarter with 2.1 percent contraction.

NBS executives led by Dr. Yemi Kale, the Statistician General, said on Wednesday that a sharp downward revision of its estimates was prompted by sharp falls in the Naira after dollar peg was dropped.

With the contraction in 2016 that would mark Nigeria's first year of recession in 25 years, Kale said the economy was likely to shrink in the third quarter.

Already, the International Monetary Fund (IMF) predicted in July that Nigeria's economy would contract 1.8 percent this year.

The NBS had also revised its inflation forecasts, Kale said.

According to him, year-end inflation was estimated at between 17.1 percent and 18 percent, up from 9 percent at the start of the year. Nigeria had fixed its exchange rate at 197 to the dollar which however weakened to as low as 485 per dollar in the black market this month.

Kale said the new projection factored in the currency float.

"All things remaining constant, year-end GDP should be around -1.3 percent from our internal model," Reuters quoted Kale as saying.

Nigeria's economic growth began to slow by the second quarter of 2014 after an oil price collapsed.

Kale noted that oil sales, which generate 90 percent of foreign exchange for the Nigerian economy, contributed around 10 percent of Nigeria's GDP directly and around 52 percent indirectly through its links with other sectors.

The 2016 budget of N6.06 trillion aimed at tackling the recession was based on generating non-oil receipts largely from widening the tax net and raising debt at home and abroad to augment spending.

It was gathered that the federal government has spent N720.5 billion on capital spending thus far.

However, the Presidency had argued that the Nigerian economy is performing better than the predictions of the International Monetary Fund while admitting that the inflation and unemployment rates in the country had remained “stubbornly high” despite government’s efforts.

The Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu, stated this in reaction to the Gross Domestic Product (GDP) figures for the 2016 second quarter released by NBS.

“Besides the growth recorded in the agriculture and solid mineral sectors, the Nigerian economy in 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,” he had stressed.