Nigeria’s economy recorded its biggest contraction in at least a decade in the second quarter of the year, a report by the National Bureau of Statistics released Monday shows, reflecting the COVID-19 pandemic’s economic fallout and crash in global oil prices while sparking fears that a recession may be inevitable.

Real gross domestic product for Q2 2020 fell 6.1 percent compared with a growth of 1.87 percent in Q1 2020 and 2.12 percent in Q2 2019, ending a three-year trend of positive real growth rates seen since the 2016 recession. The decline came on the back of significantly lower levels of domestic and international economic activity during the quarter, caused by nationwide lockdowns meant to curb the spread of the deadly coronavirus outbreak, NBS said.

Like several countries across the world, Nigeria imposed lockdown measures in March after recording its first case of the virus late February. Efforts included movement restrictions implemented in few states, a nationwide curfew, bans on domestic and international travel, as well as the closure of schools, religious houses, and markets.

These precautionary efforts by both the federal and state governments evolved over the course of the quarter and persisted throughout, affecting both local and international trade, the report said. Industry real GDP contracted by -12.05 percent compared to 2.26 percent in Q1 2020 and 2.10 percent in Q2 2019.

The weak growth is “deeper than expected but not surprising,” said Wale Olusi, Head of Investment Research at Lagos-based United Capital Plc, as Nigeria’s biggest revenue earner – oil – contracted by -6.63 percent from 5.06 percent in the first quarter of 2020 and 5.15 percent in the second quarter of 2019. Non-oil GDP also fell by -6.05 percent from 1.55 percent in the previous quarter and 1.64 percent in the same period last year.

Only 13 activities saw positive real growth compared to 30 in the first quarter with the standout performers including financial services and telecommunications, which saw growth rates of 28 percent and 18 percent, respectively.

Foreign exchange revaluation gains, increased digital adoption, and strategic positioning of these sectors supported their performance, Olusi said, but notes the digital economy still needs to be “properly captured” due to the rising amount of activities in the digital space that may not be included by telecoms or ICT.

The latest GDP data surpasses projections from both the World Bank and the International Monetary Fund, indicating Africa’s largest economy may be on the brink of seeing its biggest contraction in decades. In its June outlook, IMF forecast a deeper contraction of 5.4 percent as against the 3.4 percent projection in April.

Purchasing Manager’s Index, a monthly measure of manufacturing activity released by the central bank, stood at 48.5 index points in August, its fourth straight contraction since May. The composite PMI for the non-manufacturing sector stood at 44.7 points, reflecting a decline in non-manufacturing activities for the fifth consecutive month.

Nigeria has been on a phased lockdown easing and gradually re-opening its economy over the past few months with a ₦2.3 trillion stimulus intervention also set up. The ban on local flights has been lifted and international flights are scheduled to resume August 29.

But that may not be enough to save the economy from a recession – generally regarded as two consecutive quarters of negative GDP growth – as economic activities are yet to fully peak, with signs indicating a muted outlook in the remaining quarters of 2020.

“For the rest of the year, this (the Q2 GDP report) signals that recession will kick in fully by Q3, as key sectors such as Oil & Gas, Trade, Agric, Aviation, other Manufacturing & Services, accounting for over 50 percent, may not rebound fully by end of September 2020,” Olusi said.

The slump could extend till the first quarter of next year, warned Peter Adebayo Managing Partner of audit firm FA Consult. “The economy could witness further decline in the second half of the year, even till Q1 2021. I expect the scarcity of dollar, depressed oil prices and limited fiscal support to put pressure on the economy,” the chartered accountant told Nairametrics.

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