Nigeria In Trouble As Economy Shrinks, Recession Imminent - Vanguard
Nigeria in trouble, recession imminent
•GDP now minus 0.36%
•Unemployment rises further with more job losses
By Omor Gabriel and Emeka Anaeto
NIGERIA economy shrank in the first quarter of 2016 as oil output fell and the manufacturing, financial and real estate industries declined considerably. This was coming at backdrop of further increase in unemployment rate in the country. The National Bureau of Statistics, NBS, report on the economy released yesterday said that the gross domestic product, GDP, contracted by -0.36 per cent from a year earlier suggesting that the economy is now entering recession as second quarter is also projected to turn out worse GDP position given some recent developments.
The GDP has been on steady decline since last year ending the year with a fourth quarter growth rate of 2.11 per cent. The last time the economy contracted was in the second quarter of 2004, according to data on the website of the Central Bank Nigeria, CBN.
According to NBS, ‘’in the First Quarter (Q1) of 2016, Oil production stood at 2.11million barrels per day (mbpd) 0.05 mbpd lower from production in Q4 of 2015. Oil production was also lower relative to the corresponding quarter in 2015 by 0.07mbpd when output was recorded at 2.18mbpd’’.
Situation has since worsened in the sector with the Minister of State for petroleum Resources, Dr Ibe Kachikwu, saying that production is now down to1.4 mbpd, due to increased militancy activities in the Niger Delta Region in recent weeks.
In the non-oil sector, NBS stated that ‘’while activities such as Crop production, Trade and Telecommunications & Information Services supported growth of the sector, growth in overall was weighed down by declines in Manufacturing, Financial Institutions, and Real Estate’’.
The non-oil sector, consequently, slowed 0.18 per cent in real terms in Q1 of 2016 and this was 5.77 percentage points lower from the corresponding quarter in 2014 and 3.32 percentage points from the previous quarter .
“It is going to be a difficult year, and probably will go into next year because the causes of the economic troubles are still there,” Magnus Kpakol, Director at Abuja-based consultancy Economic and Business Strategies, said. “Oil prices are not just low, but production has also reduced.”
According to NBS “during the quarter, aggregate GDP stood at N22, 262,575.97 million (in nominal terms) at basic prices. Compared to the First Quarter 2015 value of N21,041,701.10 million, nominal GDP was 5.80 per cent higher. Nominal GDP growth was however lower relative to levels recorded in the last quarter of 2015 by 14.15 per centage points.
‘’As a share of the economy, the Oil sector contributed 10.29 per cent of total real GDP, marginally lower from the share recorded in the corresponding period of 2015, yet higher from the share in fourth quarter of 2015 by 2.24 per cent points. In the non-oil sector GDP, NBS stated that while activities such as Crop production, Trade and Telecommunications & Information Services supported growth of the sector, in overall growth was weighed down upon by declines in Manufacturing, Financial Institutions, and Real Estate.
The sector slowed 0.18 per cent in real terms in the first three months of 2016, and this was 5.77 percentage points lower from the corresponding quarter in 2014 and 3.32 per cent points from the previous quarter . In real terms, the Non-Oil sector contributed 89.71 per cent to the nation’s GDP, marginally higher from shares recorded in Q1 of 2016 (89.55 per cent) yet lower from and Q4 2015 (91.94 per cent).
Crude Oil and Non-Oil Growth
The other major factor in the decline of GDP came from the four main activities that make up the Mining & Quarrying sector, which include, Crude Petroleum and Natural Gas, Coal Mining, Metal ore and Quarrying and other Minerals.
According to NBS “on a nominal basis, the sector slowed by 34.98 per cent (year on-year) during the first three months of 2016. This was 11.22 per cent higher from growth recorded in 2015, and marginally higher from growth recorded in the previous quarter. The decline in year-on-year growth is attributable to the falling oil prices. The sector contributed 4.14 per cent to overall GDP in the first three months of 2016, lower than the contribution recorded in same quarter of 2015 and the preceding quarter by 2.60 per cent p and 1.04 per cent points respectively.
In real terms, Mining and Quarrying sector slowed at 2.96 per cent (year-on-year) between January and March 2016, a relative improvement from the same period in 2015 by 4.94 per cent and Q4 2015 by 5.08% points. “While Crude Oil output weighted on growth, the sector was supported by a substantial improvement in output in Metal Ores. The contribution of Mining and Quarrying to Real GDP in Q1 2016 was 10.34 per cent, marginally lower relative to the corresponding quarter of 2015 yet higher from the previous quarter by 2.13 per cent.
According to the report “In nominal terms, the agricultural sector grew by 14.15 per cent year-on year between January and March 2016. This was higher than growth rates recorded in the corresponding quarter of 2015 and the Q4 2015 by 6.71 per cent and 4.65 per cent respectively. Growth in the sector was driven by output in Crop Production accounting for 83.67 per cent of overall growth of the sector. Agriculture contributed 19.17% to nominal GDP during the quarter under review. This was higher than shares recorded in the corresponding period of 2015 by 1.40 per cent yet lower than the contribution in the last quarter of 2015 by 3.39 per cent.
“Real agricultural GDP growth in the first quarter of 2016 stood at 3.09 per cent (year-on-year), a decrease of 1.61 per cent from growth recorded in the corresponding period of 2015 and also lower by 0.39 per cent from the last quarter of 2015. While positive, growth in agricultural output has been relatively lower compared to the corresponding period of 2014 as a result of lower crop output which in turn was as a result of lower productivity during dry season farming during the quarter. Agriculture contributed 20.48 per cent to Real GDP during the quarter under review. This was higher than shares recorded in the corresponding period of 2015 by 0.69% points yet lower than shares recorded in Q4 2015 by 3.70% points.
“Nominal GDP growth of Manufacturing in Q1 2016 slowed by 2.98% (year-on-year), 4.23% points lower from growth recorded in Q1 2015 and 9.91% points lower from growth in Q4 2015 as a result of slower growth in 10 of 13 subsections of the Manufacturing sector. On a Quarter-on-Quarter basis, the sector slowed by 11.92%. The contribution of Manufacturing to Nominal GDP was 9.93% in Q1 2016, lower than the 10.17% recorded in the corresponding period of 2015, and marginally lower
from 9.09 in Q4 2015. In Q1 2016, Real GDP growth of the manufacturing” sector slowed by 8.39%, 14.17% points higher from growth recorded in Q1 2016 with Oil Refining, Cement, Food, Beverage and Tobacco and Electricity activities weighing on growth. Growth was however 7.27% points lower from rates recorded in Q4 2015, (Figure 6). On a quarter-on-quarter basis, the sector slowed on the margin by 11.91%.
Unemployment rate soars further
The escalating economic crises in the country has resonated in the labour market as unemployment rate rose further to 12.1 per cent in the first quarter of this year. Unemployment rate has been on steady rise since second quarter of 2015 when it stood at 8.2 per cent before rising to 9.9 per cent and 10.4 per cent in third and fourth quarters of last year respectively.
According to the labour market report released yesterday by the NBS, the number of unemployed in the labour force, increased by 1,449,18 persons as against increase of 518,000 recorded in the previous quarter. With this figure, under the previous methodology of NBS, Nigeriafs unemployment rate would have been 31.2 per cent, the third highest in Africa behind Djibouti, Congo and Kenya.
The report also indicated that, there were a total of 24.5 million persons between the ages of 15-64 that were willing and able to work and actively seeking for job that were either unemployed or underemployed compared to 22.45 million in the fourth quarter of 2015, and 20.73 million in the third quarter 2015.
Also within the same period in 2016, the total number in full time employment decreased by 528,148 persons or 0.97 per cent, and this figure, according to NBS, consists of people who lost their jobs and were either forced or for various reasons, chose to move from full time employment to underemployment.
Against this backdrop, the number of underemployed in the labour force during the review quarter, however, increased by 607,613 persons, bringing the total number in this category to 15.02 million and resulting in an increase in the underemployment rate to 19.1 per cent in the first quarter 2016 from 18.7 per cent in the previous quarter. NBS defines the underemployed as those working but doing largely menial work or jobs not commensurate with their qualifications or not fully engaged and merely working for few hours, less than 20hours.
According to NBS the increase in underemployment is in line with an increasing trend of informal sector job creation outpacing formal sector job creation forcing people to settle for less preferred underemployment, but it also included those that choose to work fewer hours or not be engaged in work full time for various reasons.
Unemployment and underemployment were highest for persons in the labour force between the ages of 15-24 and 25-34 years which represents the youth population in the labour force. Accordingly, 56.1 per cent of Nigerians in the labour force (not entire population) aged 15-24 years were either unemployed or underemployed in Q1 2016 compared to 53.5 per cent in Q4 2015 while another 32.8 per cent aged 25-34 years were either unemployed or underemployed in Q1 2016 compared to 31.3 per cent in Q4 2015.
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