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Nigeria slumps into recession in Q2

​Nigeria’s recession received the official stamp with real GDP down 2.06% y/y in Q2’16. Whilst a negative growth was expected, the size of the decline is of greater importance with Bloomberg Consensus and Vetiva estimates varying as wide as -1.6% and -2.9% respectively. We witnessed three key policy events in the quarter: partial deregulation of petroleum downstream and full assent of 2016 budget in May, and liberalization of the foreign exchange (FX) market in June. However, accrued benefits from these were likely to have been minimal in the period with the economy instead greatly injured by prior policy inertia, surging prices and increased international isolation.

We expect recession to last for the rest of the year with Q3 and Q4 GDP growth to register at -1.72% and -1.09% respectively to bring 2016 annual growth to -1.32%. This is because the underlying drivers of the slump – challenges in oil production and currency weakness – are unlikely to ease until the turn of the year. Furthermore, with a tighter monetary environment in H2 and funding delays for Government capital expenditure, we do not anticipate any significant positive shocks this year. Driven by low base effect and a brighter currency outlook, we expect a minor growth rebound in 2017 to 1.23%.