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NIGERIA GROSS DOMESTIC PRODUCT - COVID-19 drags economy further by 3.62% y/y

The Nigerian economy slid into its second recession in five years, following the 3.62% y/y contraction recorded in Q3’20 (Q3’19: +2.28% y/y). The economy had earlier recorded a 6.10% y/y slump in Q2’20, as the lockdown hampered economic activities for five weeks. Despite the gradual easing of the lockdown, the economy continued to experience a slowdown due to the disruptive effects of COVID-19 on consumption, investment and trade.

Headwinds drag the tangible sector
The tangible sector slumped by 1.91% y/y in Q3’20 (Q2’20: -5.40% y/y), pummeled by the external shocks and reforms in the downstream sector. Construction and agriculture sectors grew by 2.84% y/y and 1.39% y/y respectively while the manufacturing and mining sectors fell by 1.51% y/y and 13.22% y/y respectively. The border closure policy has supported growth in agriculture, which has seen improved funding and interventions. This improved the sector’s contribution to growth to 30.77% in Q3’20 from 24.65% in Q2’20 and 29.25% in Q3’19. The sector was however marred by missed planting seasons during the lockdown and adverse weather conditions. Due to the impact of the pandemic and flooding on output, the country has been identified as a potential famine hotspot by the Food and Agricultural Organization (FAO).

Output losses to extend recession into Q4’20
Although the rate of COVID-19 infections and deaths are not as high as in advanced economies, the butterfly effect of the pandemic on the economy is profound. The economy is on course to witness its deepest full year contraction in at least a decade as the pandemic is a tripartite shock to demand, supply and the financial sector. With the current pace of job losses and rising inflation, weak consumer demand has propelled re-packaging of products to reflect the downbeat state of consumer wallets.