The effect of the current economic recession has continued to sink deeper as Nigeria’s economy contracted in the third quarter as businesses struggled to access foreign exchange and militants continued to bomb oil pipelines in the restive south, official data showed Monday.
“The nation’s gross domestic product (GDP) contracted by -2.24% year-on-year,” the country’s National Bureau of Statistics said in a report.
The Nigerian economy is reeling and bruised following the crash in global oil prices from over $100 a barrel in 2014 to around half that today.
A contraction appeared inevitable when militants renewed attacks on the country’s oil infrastructure, strangling production that accounts for around 70 per cent of government revenue and the bulk of Nigeria’s export earnings.
The relentless sabotage has put the Nigerian government under pressure as economists increasingly question whether President Muhammadu Buhari can pull the country out of recession.
“During the period under review, oil production averaged at 1.63 million barrels per day (bpd),” the statistics agency said.
That is a 22-percent drop from the same period last year, when Nigeria was producing 2.17 million bpd.
Manufacturing also took a big hit, shrinking by 2.9 percent in the wake of a devalued naira and currency controls that have curbed trade.
“This is partly due to the continued fall in the exchange rate, which makes imported inputs more expensive, thereby increasing business costs,” the statistics agency said.
“This is greatly a result of the continued fall in (the) naira to dollar rate which translates to much higher cost of business operations.”
In early 2016, Buhari had vowed not to “kill the naira” by letting it fall in value, in opposition to depreciations by fellow major oil exporters Angola and Russia.
His government tried to prop up the naira for months, but that drained foreign currency reserves and it eventually abandoned the currency peg in June.
A dollar shortage persists, with black market rates hovering around 440 naira to the dollar this month compared to the official bank rate of approximately N320 to the dollar.
The economic troubles look to last, with peace talks between the Nigerian government and oil rebels falling apart this month — the Niger Delta Avengers claimed they bombed three pipelines last week — and foreign investors steering clear until they see a more coherent currency policy.
The International Monetary Fund has forecast the West African nation’s gross domestic product will shrink by 1.7 percent this year, the first full-year contraction in more than two decades, according to Bloomberg News.