The largest African economy, Nigeria has fallen into a recession in the third quarter as oil production dropped to a four-year low. Nigeria's GDP contracted 3.6% in the three months from September from a year earlier, compared with a 6.1% contraction in the previous quarter, Statistician-General Yemi Kale said Saturday in a report. The median estimate of six economists in a Bloomberg survey was for a 5.3% decline.
The country's Oil production fell to 1.67 million barrels a day from 1.81 million barrels in the last three months. The production is the lowest since Q3 in 2016, during which the economy was in a contraction for over a year. African continent's top crude producer cut production in order to reach full OPEC+ compliance. The crude oil contributes less than 10% to Nigeria's GDP, but accounts for about 90% of foreign-exchange earnings and half of government revenue. The contraction complicates the task of the central bank's monetary policy committee as it starts its two-day meeting on interest rates on Monday. The MPC panel surprised with a 100-basis-point cut in September to support the economy.
The west African economy was hit harder than most other countries on the continent by the twin impact of coronavirus lockdowns and the plunge in the oil price. The country has recently closed its borders in an attempt to curb smuggling and boost local production. But the closure weighed on Nigerian exports and on the supply of some food products, adding to inflation. Experts suggest to open the borders and a change in the monetary policy posture of the central bank for return to positive growth. Nigeria is to face biggest drop in GDP of nearly four decades, if GDP falls contracts by 4.3% as predicted by the International Monetary Fund.
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