Nigeria's economy exited recession unexpectedly in the fourth quarter of 2020. Although oil production dropped sharply - to 1.56 million barrels a day from 1.67 million barrels a day in the quarter preceding it, growth in telecommunications and agriculture compensated for it.
According to Nigeria's National Bureau of Statistics, gross domestic product grew 0.11% in the three months through December from a year earlier, compared with a decline of 3.6% in the third quarter. The economy contracted 1.92% for the full year, the most since at least 1991, according to International Monetary Fund data.
What this surprise rebound means for Nigeria is its economy may recover faster than expected as the oil price and output increase this year. It could also point to the growing importance of the non-crude sector.
The growing importance of the non-crude sector in Nigeria is significant because of Nigeria's over reliance on crude for its foreign-exchange earnings and government's revenue. Crude contributes less than 10% to the country’s GDP, yet it accounts for nearly all foreign-exchange earnings and half of government revenue in the continent’s biggest producer of the commodity.
The non-oil economy expanded by 1.7% from a year earlier, the strongest rate in four quarters, with agriculture growing 3.4% and telecommunications increasing 17.6%.
For Nigeria's central bank, a stronger recovery could ease pressure on it to stoke activity, paving the way for it to renew focus on its price stability mandate. That means the monetary policy committee could start raising interest rates again to fight inflation that’s been above the target band of 6% to 9% for more than five years. The panel eased by 200 basis points in 2020.
Nigeria's government forecast a growth of 3% this year, double that of the IMF. The lender has warned a slow roll-out of Covid-19 vaccines could threaten the economy’s recovery.
Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank said: “The fact that we have seen a recovery in non-oil GDP growth is positive. However, the headwinds associated with the second wave of Covid-19 may still be considerable.”
Nigeria in focus:
Population: 200.9 million (2019)
GDP: $448.12 billion (2019)
GDP Per Capita: $2,229 (2019)