Nigeria – so many people, too little reform
President Muhammadu Buhari

Recession on Horizon as Key Indicators Worsen, NBS to release GDP data

Economic recession is now on the horizon as key indicators worsen ahead of the release of the second quarter 2020 gross domestic products (GDP) data by the National Bureau of Statistics (NBS).

In the first quarter of 2020, economic expanded by 1.9%, but with the outbreak of coronavirus pandemic, the nation’s GDP is expected to come negative.

In its macroeconomic note, United Capital said the fir, expects economic activities to decline by about 3.6% and 3.8% given the lockdown measures implemented during the period.

Meanwhile, with its projection, the investment firm expectation came in stark contrast to 5.4% drop earlier estimated by the International Monetary Funds.

In recent time, the Nigeria’s macroeconomic indices are becoming worse following multiple issues facing the policy makers.

Recession on Horizon as Key Indicators Worsen, NBS to release GDP data
President Muhammadu Buhari

The investment firm said it expects negative growth to affect the stock market sentiment.

Following a continuous drop in key indicators, slews of analysts have projected that the impending economic recession would be tough for the nation.

Already, the government has lost touch balancing the tripartite evils of high unemployment, steep and continuously rising inflation and interest rate.

Revenue has been on decline due to dwindling global oil prices, production volume and recent penalty for lower supply to meet OPEC compliance.

Analysts at United Capital stated that as the reality of weaker oil revenue begins to kicks in, the Federal Government of Nigeria rolled out a zero-oil plan, noting that it has identified 22 non-oil strategic products.

The plan is currently beings implemented by the Nigeria Export Promotion Council, in collaboration with the private sector, and it is estimated to be worth over $150 billion in annual export value.

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Accretion into external reserves has been low, which thus limit the Nigerian central bank to continue support for the local currency, naira.

For 11-months consecutively, average price level has been on ascendancy before it hits the peak at 12.82% in the month of July according to the National Bureau of Statistics.

While the nation is dealing with sustained price instability that has also been fuelled by devaluation of the local currency and border closure, data has also shown that unemployment rose steeply.

The nation’s gross domestic products was projected to drop by 5.4%, according to International Monetary Fund.

The decline would reduce economic capacity, thus force a further increase in joblessness on Nigerians amidst rising misery index.

NBS data registered unemployment rate at 27.1%, though some analysts have expressed view that the figure downplays the current reality.

Afrinvest said it discovered that underlying numbers suggest that the labour market is in a worse state than the headline unemployment rate would suggest.

The last time NBS published labour statistics was in the third quarter of 2018 before the recent labour data for the second quarter was released.

In a macroeconomic note, Afrinvest said as expected, the numbers are grim as unemployment rate climbed to 27.1%.

The firm stated that the abridged nature of the report raises a lot of questions about the changes in methodology apart from the fact that there is a gap in reporting.

“We have previously noted that the lack of timely labour data made it difficult to assess the health of the labour market and measure the impact of government policies targeted at creating jobs”, Afrinvest stated.

Explaining further, the investment firm said it concerns have only slightly eased as labour data between Q4:2018 and Q1:2020 remain outstanding despite the recent update.

“This means we cannot conduct a trend analysis to better understand and explain what happened in the labour market between Q3:2018 and Q2:2020”, the firm remarked.

It explained that the social distancing measures taken to fight COVID-19 also hurt data collection.

Especially given large informal sector activity and without real time tracking of those in unemployment with alternative methods such as social security enrolment.

As a result, Afrinvest recognised that the National Bureau of Statistics made changes to its methodology in Q2:2020.

Some of these changes made by NBS, as Afrinvest noted include the use of the Computer Assisted Telephone Interview method to conduct the survey as against the use of telephone surveys in the past while the sample size of the households under coverage was reduced.

The report shows that unemployment rate rose to 27.1% in Q2:2020 from 23.1% in Q3:2018 while underemployment rate increased to 28.6% from 20.1%.

Afrinvest said this is the worst performance on record since the reporting of quarterly data began in 2010.

“We are surprised by the reduction in the size of the labour force by 10.2 million to 80.3 million between Q3:2018 and Q2:2020 as this is the only decline on record.

“This implies that a large number of people of employment age were not interested in working.

“The decline was mainly driven by the reduction in the number of male persons available to work by 16.3% to 41.7 million while labour force population in the rural area was down 19.1% to 51.8 million.

“The reason for the decline is unclear. More worrying is the 0.7% annualised increase in the size of the economically active population to 116.9 million, which is lower than the historical growth of 3.3% yearly”, the firm explained.

However, Afrinvest said it noted the steep decline in the number of fully employed people to 35.6 million from 51.3 million in Q3:2018 and the peak level of 55.7 million in Q1:2015.

The total number of employed, including underemployed, also fell sharply to 58.5 million from 69.5 million.

Furthermore, the report noted the continuous rise in youth (15 – 34 years old) unemployment rate to 34.9% from 29.7%, while the rate of underemployment rose to 28.2% from 25.7%.

Analysts observed that the trend in youth unemployment and underemployment is the worst of all age groups despite benefiting from government’s targeted employment programmes.

Overall the Q2:2020 unemployment report shows that the labour market has worsened in the past seven quarters, the firm stated.

Afrinvest said the sharp moderation in the size of people in employment and in full-time employment raise concerns about growth prospects, especially as labour productivity growth is poor.

“We reiterate that reforms that open sectors to investment and strong economic growth are crucial to creating jobs and slowing the pace of unemployment”, Afrinvest stated.

MarketForces reported that foreign portfolio investors have reduce, inflation rising and unemployment hit rooftop while naira is losing its purchasing and store of value features.

Recession on Horizon as Key Indicators Worsen, NBS to release GDP data


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