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Published: Sun, September 04, 2016
Economy | By Melissa Porter

Africa's Biggest Economy Officially Enters Recession

Africa's Biggest Economy Officially Enters Recession

Nigeria, the African continent's largest economy, has slipped into recession, causing a halt in forecasts of increased fiscal health for not only the nation, but the region.

The new NBS figures show that the Nigerian economy contracted by 2.06 percent in the second quarter of 2016, sliding further from a negative growth of 0.36 percent, which was experienced in the first quarter of the year.

Crude sales accounts for around 70 percent of government revenues.

Yet, even if the oil price rebounds and rebels stop sabotaging oil production, Nigeria has to revamp its decrepit infrastructure and start producing more electricity to diversify its economy and embark on a path of sustainable growth.

The slowdown was recorded across many sectors in a sign that Africa's economic giant is wrestling with deeper structural issues than just the low price of crude.

However, the presidency has said that although there is a decline, the figures indicated an hopeful expectation in the country's economic trajectory.

He pointed out that the recession has already led to unemployment, lower wages and incomes, as well as lost opportunities.

"The effects will be long-lived if not properly managed". That's the highest rate since October 2005, according to data on the Central Bank of Nigeria's website.

The office of the vice president, who oversees economic policy, said in a statement it expected a "better economic outlook" for the second half of 2016 "because numerous challenges faced in the first half either no longer exist or have eased". Given that oil's price has slumped from more than $100 per barrel in 2014 to roughly $48 now, it is perhaps unsurprising that the country has struggled for economic growth.

Recession confirmed, tough outlook ahead Nigeria's recession received the official stamp with real GDP down 2.06% y/y in Q2'16.

Nigeria's current woes remain oil reliance and the cure is diversification which could not only steer the nation from being heavily impacted by external shocks but also spur economic growth.

"Although the challenge of this recession is deeper than what was earlier envisaged, what the country needs now is basically the confidence of investors more than anytime else".

"We have to invest in capital projects".

Another economic analyst, Victor Ndukauba, said the way out was for government to think outside the box, improve governance and fiscal policies.

"There are no silver bullets".

This is the worst the country has depreciated since 1991.

"A very ambitious budget was outlined, but we know from the past that Nigeria doesn't have a good record in delivering on time", Khan said.

Although we could see some benefits to having liberalized the economy, it is still not a panacea, says Razia Khan, an economist for Standard Chartered Bank.

"It's a hard time for Nigeria but I think Nigeria is in the right hands and if we can stick with our strategy..."

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