#BounceExclusive: Nigeria May Be Heading Back To Recession And Here Are 3 Reasons
You probably have been hearing about the second quarter Gross Domestic Product, GDP report released by the National Bureau of Statistics on Monday, August 27th.
In case you are wondering what the fuss has been, it is about the performance of the Nigerian economy between April and June this year.
And this is based on the monetary measure of the market value of all the final goods and services produced in Nigeria within the period.
And frankly, it did not look that good, even though the government is trying to look at the brighter side of things.
So, here is the thing; according to the NBS report, between April and June this year, Nigeria’s economy grew by only 1.50%, that is compared to April to June of 2017.
In naira and kobo, this means that the economy saw only addition of 16.58 trillion naira within the period.
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This puts growth between April and June of 2018 at only 0.79% points higher when compared to the same period in 2017. The growth recorded between April and June of 2017 was 0.72%
But forget those numbers and percentages. The real problem was that when compared to the growth recorded from January to March this year, the economy shrank by -45%, when the economy recorded a 1.95% growth.
And that is what the fuss is all about. The fear now is that if the economy continues to shrink in the remaining quarters of the year, the economy would be back to recession – hard times.
But why didn’t the economy grow between April and June this year?
Here are reasons given by some economic analysts who spoke to Bounce News in Lagos.
1. Farmers-Herdsmen Clashes:
This goes without saying, the clashes between farmers and herdsmen became more frequent within the period. Farmers were simply unable to go to their farms, and that significantly affected agricultural output.
“If you looked at the NBS report, you would see that the Agricultural sector declined by –1.89%. That is the effect of the pastoral conflict we had across most of the North central region.
"There was no way the economy would have escaped the implication of such conflict. The Agricultural sector figures we are seeing in the GDP was bound to be there,” said Solomon Nnazor, an economic analyst.
Also making the same argument, Adim Okwesa, a Research Analyst at Financial Derivatives Company noted that despite the decline recorded in Agric sector, Nigerians appear to still be safe at the moment, “because of the harvest season.”
But he also noted that it is from the last quarter, between October and December, “that we will see this pastoral conflict having a more pronounced effect on food output”.
“And that raises the question on food security, and it is a problem that the government needs to find a long-lasting solution to,” he added.
2. Apapa Traffic Gridlock:
The Apapa gridlock has been a pain in the neck of any business that has anything to do with Apapa port. As at the second quarter of this year, the traffic crisis worsened, and government reacted by issuing orders that were complied with for only a day.
And now, exporters are cancelling supply contracts with their foreign clients because their consignments cannot even get into the port, where they can be shipped.
Importers are lamenting that they now must spend days, in addition to having to pay about 800, 000 naira to get one container out of the port. All these have compounded the problem for the economy.
“Until Apapa port traffic congestion is sorted out, it is impossible to see how the economy will grow. See, our economy is heavily dependent on import and anything that hinders the logistics flow around import becomes a problem for the economy.
"I own a few trucks that ply Apapa port. Sometimes, to move a container from Apapa port to Abeokuta will take no fewer than 3 weeks. How will the economy grow like that?” lamented a Dangote group worker, who preferred not to be named.
He added: “Dangote and Nigeria Flour Mills are building a road that is expected to ease the congestion around this corridor. But I can tell you, the work is slow, very slow. Until then, I am not sure of any reprieve.”
Recently, especially within the period under review, we have been hearing of flood destroying farmlands. No region has been spared of the flooding which hit the country at the peak of the rainy season. From farmers in Katsina to rice farmers in Adamawa to famers in Delta and Enugu, the story was the same.
“This flooding wasn’t particularly helpful to the economy. We saw the instances where rice farmers in the north for instance lost their farms to flood and some of these farmers got these moneys through the CBN loan programme.
“So, it is a troubling situation that has serious implication. In the coming quarters, chances of food inflation are highly likely as we get into the post-harvest season,” noted economist Cletus Odom.
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