Nigeria’s economy has been weakened by persistent economic problems, as evident by the business environment and rising inflation, which are further exacerbated by subpar oil production over the past three months, according to official data. The Gross Domestic Product (GDP) grew by 2.25 percent year over year in Q3,2022, which is the slowest growth since the COVID-19 pandemic. The National Bureau of Statistics (NBS), which released its most recent report on GDP yesterday, attributes the poor growth to the fundamental consequences of the crisis and the difficult economic circumstances that have stifled productive activities. According to analysts, the biggest burden on the economy is a decrease in oil and gas output brought on by platform repairs, security issues, and sabotage.
According to some, if the problems don’t get better, the nation might be on the verge of another recession. From the 4.03 percent growth rate observed in Q3, 2021, the Q3, 2022 growth rate dropped by 1.78 percent points, and by 1.29 percent points from the 3.54 percent growth rate observed in Q2, 2022. As of Q3,2022, the oil and gas sector shrank by -22.67% (year over year), which is a fall of 11.94% points from the rate seen in the same quarter of 2021.
Oil production volume has been below one million barrels a day.
In comparison to the same period in 2021, when Nigeria was producing up to 1.5 million barrels per day of crude oil, oil production output has dropped below one million barrels per day until the beginning of the fourth quarter. The Organization of Petroleum Exporting Countries set a production quota of 1.8 million bpd, which Nigeria now falls short of (OPEC). Contrarily, during the reference quarter, the non-oil industry rose by 4.27 percent in real terms (Q3,2022). This rate is 0.50 percentage points lower than the second quarter of 2022 and 1.18 percentage points lower than the rate seen in the same quarter of 2021.
Financial and insurance institutions, trade, transportation (road transport), agricultural (crop production), and real estate were the key drivers of growth in the non-oil sector, which contributed to positive GDP growth. The non-oil sector increased its share of GDP to 94.34 percent from the preceding sector’s 93.67 percent, while the oil sector contributed 5.66 percent to the total real GDP over the period. The most recent GDP figures unmistakably show that the economy is technically in a recession, according to Kelvin Emmanuel, chief executive officer of Dairy Hills Limited.
It takes a shorter time of 3.2 years for the rate of inflation to double.
According to Emmanuel, the fact that the GDP adjusted for inflation fell from 4.03 percent to 2.25 percent, a decrease of 1.78 percent, is evidence that the bond yield curve is inverting, and the economy is technically in a recession. He continued that to the rule of 72, it takes 3.2 years for the rate of inflation to double and currency to lose 100% of its value as opposed to 32 years for the GDP to double. The increase in core inflation to 21.09% and the decline in gross domestic product to 2.25 percent.
Going back in time, Emmanuel suggested that, in 2014, with a GDP of 6.3%, it would take just 11.4 years to double and, in contrast, 8.9 years, or 394%, for the currency to lose 100% of its value. This is evidence that a government’s pursuit of an expansionary monetary policy without regard for the regulations and precedents set forth in the Fiscal Responsibility Act and the Central Bank of Nigeria (CBN), as well as internal and external factors that have impacted production output, have made it challenging for monetary policy tools to reduce inflation in a setting characterized by helicopter money and the policy summersault of both raising C and C. This is a puzzle!
There are many uncertainties in the nation’s economy.
The nation’s economy, according to financial analyst Mustapha Suleiman, is very fragmented. He claimed that the coordination required to control the many aspects of the economy has not been present. The expected cooperation between those responsible for monetary and fiscal policy does not appear to exist under this administration. ICT has helped important economic sectors recover after the pandemic, according to telecoms expert Kehinde Aluko, who was speaking about the growing contribution of ICT to GDP. He claims that ICT has consistently offered a way out of difficult situations, and because of this, stakeholders feel that the ICT sector’s performance will continue to improve.