Nigeria’s economic slump continued in the third quarter hit by low oil revenue and foreign investors’ wariness of the government’s fiscal and monetary responses.
Gross domestic product in Africa’s most populous country contracted 2.2 percent in the three months through September from a year earlier, after shrinking 2.1 percent in the second quarter, the Abuja-based National Bureau of Statistics said in an e-mailed statement Monday. The median of 15 economist estimates compiled by Bloomberg was for a 2 percent contraction. The economy expanded a non-seasonally adjusted 9 percent from the second quarter, the statistics office said.
Government revenue has plunged with the decline of oil prices, the country’s main export, since mid-2014, and production fell as militants in the Niger River delta blew up pipelines. The authorities have struggled to manage the economic fallout, at one point pegging the exchange rate against the dollar for more than a year and more recently using law enforcement to bring down the street price of foreign currency.
The third-quarter data is worrisome because “it was expected that the liberalization of the petroleum sector and foreign-exchange market would have helped,” Michael Famoroti, an economist at Lagos-based Vetiva Capital Management, said by phone. “We didn’t see that. It means the monetary and fiscal authorities will have to step up their efforts to address the output decline.”
Crude production fell to 1.63 million barrels per day in the third quarter, from 1.69 million barrels in the three months through June, the statistics office said. The oil industry contracted by 22 percent from a year earlier. The non-oil sector, which includes manufacturing, banking and agriculture, expanded 0.03 percent. Factory output contracted 4.4 percent, the third consecutive quarter of decline, and construction shrank 6.1 percent, the fifth straight quarterly contraction.
“There should be some improvement in oil production and that should reduce the contraction in the fourth quarter,” Yvonne Mhango, a sub-Saharan Africa economist at Renaissance Capital Ltd. in Johannesburg, said by phone. “I’m still in the camp that thinks the third quarter is when we see the deepest contraction.”
The slump in oil and shortages of foreign currency and power could cause the economy to shrink 1.7 percent this year, according to the International Monetary Fund. That would be Nigeria’s first full-year contraction since 1991, according to data from the Washington-based lender.
Nigeria’s Senate rejected the government’s spending plan for the next three years earlier this month because the proposals, which were meant to boost the economy, lacked details. Lawmakers also rejected President Muhammadu Buhari’s plan to borrow $30 billion abroad through 2018 on the same grounds.
The central bank removed its 197-199 naira per dollar peg on June 20, causing the currency to lose more than a third of its value. The Monetary Policy Committee, which will announce its interest-rate decision on Tuesday, left the benchmark rate unchanged at a record-high 14 percent in September to help prop up the naira and fight inflation, which quickened to an 11-year high in October, even as the economic outlook deteriorated.
While the third-quarter GDP data “will put pressure on the central bank as they meet, I don’t think it is going to change their stand as inflation remains very high,” Famoroti said. “Inflation is going to remain their focus, as well as the foreign-exchange market.”
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