Like South Africa, Nigeria may slip back into economic recession

Like the South African economy, Nigerias central bank says the country may slip back into economic recession, exactly a year after Africas largest economy rebound from its worst decline in 25 years.

Three weeks ago, South African economy unexpectedly slid into recession, shrinking 0.7% in the second quarter.

The country's economic downturn was driven by contractions in agriculture, transport, trade and manufacturing industries.

Godwin Emefiele, the governor of the Central Bank of Nigeria made this known at the end of the Monetary Policy Committee (MPC) meeting in Abujaon Tuesday, September 25, 2018.

Emefiele said MPC members were concerned that “the exit from the recession may be under threat as the and 1.50% in the first and the second quarter 2018 respectively”.

He said the committee “noted that the slowdown emanated from the oil sector, with strong linkages to employment and growth in the key sectors of the economy”.

What are the threats to the Nigerian economy?

Emefiele said the threats to the Nigerian economy comes from “rising inflation and pressure on the external reserves created by the capital flow reversal as the current challenges grow”.

A towel with a print of the Nigerian naira is displayed for sale at a street market in the central business district in Nigeria's commercial capital Lagos February 4, 2016. ece-auto-gen

He noted that the inflationary measure was rebuilding, and “capital flow reversal has intensified as shown by the bearish trend in the equities market even though the exchange rate remains very stable.”

Other threats to the economy include “the potential impact of liquidity injection from election-related spending, and increase in FAAC distribution, which is rising in tandem with an increase in oil receipt.”

“Flooding and security challenges may lead to a “rise in food prices, contributing to the uptake in the headline inflation, ” the committee noted.

What government can do to avert economic shock

Nigerian President Muhammadu Buhari speaks at the United Nations General Assembly, U.S., September 20, 2016 ece-auto-gen

The monetary authority called on the fiscal authorities “to intensify the implementation of the Economic Recovery and Growth Plan (ERGP) to stimulate economic activities, bridge the output gap and create employment.”

The MPC also called on the Nigerian government to fast-track implementation of the 2018 budget to help jumpstart sustainable economic recovery and to facilitate passage of the Petroleum Industry Bill to increase contribution to the overall GDP.

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