Recession: Worst Over For Nigeria, S. Africa As Economic Growth Beckons

(Sundiata Post) – The worst may be over for Nigeria and South Africa, two of Africa’s largest economies, as they likely began to turn in some growth in the second quarter, and the worry may now shift to the quality of growth to expect, especially in a populous country like Nigeria.

Official GDP data due for release Tuesday in Abuja and Johannesburg, will probably show that the two largest economies expanded in the three months through June, ending the devastating recession.

A survey of economists conducted by Bloomberg shows that Nigeria’s gross domestic product probably grew from a year earlier to signal that Nigeria has exited its worst economic slump in a quarter of a century.

It will confirm a July 13, 2017 report by BusinessDay, which quoted economists in government, as well as some in private circles, as saying Nigeria’s second quarter, 2017 Gross Domestic Product (GDP) numbers will possibly show that the country has exited economic recession, on account of strong performance in agriculture, manufacturing, telecoms and oil.

Their confidence is boosted by the fact that these four, out of the six largest contributors to Nigeria’s GDP, are already showing strong performance.

The six sectors include agriculture, manufacturing, telecoms, trade, real estate and crude. Already, agriculture, manufacturing, telecoms and crude, will likely continue to show strong performance, the economists believe.

“It is possible that Nigeria could have returned to positive growth in the second quarter, considering that four out of the six key sectors that drive the country’s GDP are already in a positive trend,” an economist at the National Bureau of Statistics (NBS) projected.

Focus in Nigeria is now on the NBS, which is billed to release the Q2 GDP report.

South Africa and Nigeria, together account for almost half of sub-Saharan Africa’s GDP and their recoveries may boost trade and production across the region. The reasons differ: while Nigeria, the continent’s biggest oil producer, is benefiting from a rebound in crude output, stronger retail sales may help drive growth in South Africa.

“In both cases a lot of the ‘recovery’ is due to things bouncing back from very poor performances in the reference quarter,” John Ashbourne, an economist at London-based Capital Economics Ltd., said in an emailed response to questions. “But that’s not all. In both cases, there is some real growth.”

South Africa’s economy probably expanded an annualised 2.3 per cent in the three months through June, from the previous quarter, according to the median estimate of 20 economists in the survey. Nigeria’s GDP likely grew 1.3 per cent from a year earlier, after contracting for five straight quarters, a separate survey shows.

A drop in the output and price of oil, Nigeria’s largest export, and a lack of foreign currency, weighed on West Africa’s largest economy last year.

The naira weakened after new rules allowing foreign-exchange dealers to quote naira levels used in actual trade came into place, and increased inflows alleviated some of the dollar shortages.

Economic growth in Nigeria will “return to positive territory in the second quarter, on the back of a recovery in oil production, solid agriculture growth and an improvement in foreign-currency liquidity,” Yvonne Mhango, an economist at Renaissance Capital, said in an emailed response to questions.

“We expect the recovery and growth to be fragile.”

South Africa’s economic woes were exacerbated by President Jacob Zuma’s dismissal of Pravin Gordhan as finance minister, which led to Fitch Ratings Ltd. and S&P Global Ratings cutting the nation’s foreign-currency debt to junk in April. The central bank halved its GDP growth forecast for the year to 0.5 per cent in July.

Agriculture and mining were the only two industries that expanded in the first quarter and both continued to perform well in the three months through June. Farming output was boosted by the end of the worst drought in more than a century and mining benefited from rising commodity prices.

“I don’t think it’s the start of a renewed growth cycle, but I think that the fear that we are heading for a deep recession has been abated,” Kevin Lings, an economist at Stanlib Asset Management Ltd. in Johannesburg, said by phone. (BusinessDay)

 

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