Business

Africa’s biggest economy has crashed into recession

on

Prev1 of 2Next


Africa’s largest economy, Nigeria, has officially entered a recession following two consecutive quarters of contraction in the nation.

GDP shrank by 2.06% in the second quarter of 2016, following on from a 0.36% shrinking in the first quarter of the year, according to data released by the country’s National Bureau of Statistics (NBS) on Wednesday.

Those two consecutive quarters of economic shrinkage mean that the country is now in its first recession in more than 20 years.

Recession in Nigeria may be an unwelcome development, but it is not unexpected. Earlier in the year, Godwin Emefiele, the governor of the Central Bank of Nigeria warned that “recession was imminent,” the Financial Times reports.

“We have long warned of a slow-burning crisis in Nigeria,” Capital Economics’ Africa economist John Ashbourne said in May. “It now seems that this view was too optimistic: the country is headed into a full-blown economic crisis.”

The International Monetary Fund has also warned on the state of the country’s economy, forecasting that growth will shrink by 1.8% over the course of 2016.

The big driver of the slump in the Nigerian economy, which was one of Africa’s great success stories until recently, has largely been the persistently low price of oil over the past two and a half years. Nigeria relies heavily on oil and is the largest producer of the commodity on the continent, producing roughly 2.4 million barrels per day. Given that oil’s price has slumped from more than $100 per barrel in 2014 to roughly $48 now, it is perhaps unsurprising that the country has struggled for economic growth.

The Nigerian oil industry’s problems have been made even worse by a series of major disruptions in the oil-rich Niger Delta area, largely caused by a militant group calling themselves the Niger Delta Avengers. Most notably, the group attacked a Chevron offshore facility in May and the underwater Forcados export pipeline operated by Shell in late March. The production disruptions caused by these attacks and others have wreaked havoc with the already stricken industry.

Prev1 of 2Next

Comments

comments

Recommended for you

Leave a Reply