As predicted by the central bank and Ministry of Finance, Budget and National Planning, Nigeria’s economy exited recession in the fourth quarter of 2020 as growth in agriculture and telecommunications offset drop in oil production.
The gross domestic product grew 0.11 per cent in the three months through December from a year earlier, compared with a decline of 3.6 per cent in the third quarter, the Abuja-based National Bureau of Statistics said on its website on Thursday.
A report by National Bureau of Statistics (NBS), noted that though weak, the positive growth reflects the gradual return of economic activities following the easing of restricted movements and limited local and international commercial activities in the preceding quarters.
As a result, while the Q4 2020 growth rate was lower than the growth rate recorded the previous year by –2.44% points, it was higher by 3.74 per cent points compared to Q3 2020.
“On a quarter on quarter basis, real GDP growth was 9.68 per cent indicating a second positive consecutive quarter on quarter real growth rate in 2020 after two negative quarters.
“Overall, in 2020, the annual growth of real GDP was estimated at –1.92 per cent, a decline of –4.20% points when compared to the 2.27 per cent recorded in 2019.
In the quarter under review, aggregate GDP stood at N43,564,006.29 million in nominal terms. This performance is higher when compared to the fourth quarter of 2019 which recorded a GDP aggregate of N39,577,340.04 million, representing a year on year nominal growth rate of 10.07 per cent.
This growth rate was lower relative to growth recorded in the fourth quarter of 2019 by –2.26% points but higher than the preceding quarter by 6.68 per cent points with growth rates recorded at 12.34% and 3.39% respectively.
With the current surprising rebound in the oil market, the economy may recover faster than predicted by both the IMF and the World Bank.
Analysts at Bloomberg also noted the development could also point to the growing importance of the non-crude sector.
Oil production fell to 1.56 million barrels a day in the fourth quarter from 1.67 million barrels in the previous three months. While crude contributes less than 10% to the country’s GDP, it accounts for nearly all foreign-exchange earnings and half of the government revenue in the continent’s biggest producer of the commodity.
The recovery is continuing, supported by easing OPEC production cuts and higher oil prices. That said, recurring waves of virus infection, naira devaluation, high inflation and ongoing foreign-exchange shortages will continue to pose risks.”
The non-oil economy expanded by 1.7 per cent from a year earlier, the strongest rate in four quarters, with agriculture growing 3.4 per cent and telecommunications increasing 17.6 per cent.
A stronger recovery could ease pressure on the central bank to stoke activity, paving the way for a renewed focus on its price stability mandate.
That means the monetary policy committee could start raising interest rates again to fight inflation that’s been above the target band of 6 per cent to 9 per cent for more than five years. The panel eased by 200 basis points in 2020.
The government’s forecast for growth of 3 per cent this year is double that of the IMF. The lender has warned a slow roll-out of COVID-19 vaccines could threaten the economy’s recovery.
“The fact that we have seen a recovery in non-oil GDP growth is positive,” said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank. “However, the headwinds associated with the second wave of Covid-19 may still be considerable.”