IMF forecasts that Nigeria is facing recession while CBN governor says it is just stagflation

INTERNATIONAL Monetary Fund (IMF) experts have warned that Nigeria is facing a recession with a forecast that the economy is likely to contract by 1.8% this year as a result of low oil prices and the knock-on effect in other areas.

 

Over the last year, global oil prices have fallen to about $40 a barrel from a high of in excess of $100, having a debilitating effect on the Nigerian economy. Because crude oil accounts for over 90% of government revenue, the crisis has had a huge impact on state spending, which in turn has affected other areas of the economy.

 

Earlier this week, the IMF released its forecast on Nigeria in its latest World Economic Outlook (WEO) titled Uncertainty in the Aftermath of the UK Referendum. Its nine-page global report showed that Nigeria’s growth projection for this year was revised downwards, from the 2.3% it had forecast in its April report.

 

It also forecasts a 1.1% growth for Nigeria in 2017, down from the 3.5% it made in April. Growth projections were revised down substantially in sub-Saharan Africa, reflecting challenging macroeconomic conditions in its largest economies, which are adjusting to lower commodity revenues.

 

However, the Central Bank of Nigeria (CBN) governor Godwin Emefiele on the other hand, during a closed-door briefing with the Senate, informed the upper legislative chamber that the economy was suffering from stagflation. Economic stagflation refers to a period of little or no growth in an economy of less than 2% or 3% annually and relatively high unemployment, accompanied by rising prices, inflation and a decline in gross domestic product (GDP).

 

A recession on the other hand is defined as a significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade.

 

Nigeria’s GDP growth contracted to -0.36% in the first quarter of this year compared with 2.11% in the fourth quarter of 2015 and 3.86% in the first quarter of 2015. Several economists have already forecast that the economy is likely to contract again in the second quarter of this year.

 

Also, Nigeria's Consumer Price Index which measures inflation, rose by 0.9% to an 11-year high of 16.5% in June compared with15.6% in May, according to the National Bureau of Statistics.  That was the fifth consecutive month that the headline index had risen and the increase was attributed to energy prices, imported items and related products, which continued to be persistent drivers of the core sub-index.