How Nigeria Entered Economic Recession- Udo Udoma, National Planning Minister

“…We started being concerned about it a little while ago, which is last month, and we have been meeting at the Economic Management Team. The reason we are in recession has to do firstly, with the oil price; but oil price alone would not have pushed us into recession. Oil price went down from $110 to about $30 in the first quarter; it is now going up a bit to the 40s; but we had anticipated that, and in the budget, we projected a price of $38. And with $38, we would have generated enough revenue and enough foreign currency to keep the economy on a fairly even keel and then, next year, we start to grow. We thought that the performance this year will be flat and next year we start to grow, but what happened was that the 2.2m barrels of crude oil which we anticipated, we did not get. Because of militant activity, it dropped from 2.2bpd to 1.1bpd. So, half of our revenue went out. That revenue was also the foreign exchange supply because foreign exchange sustains the economy. And when you lose the foreign exchange, you also lose your non-oil revenue because your non-oil revenue depends on the foreign exchange from oil.

“We thought it will be a flat performance but not a recession. If we didn’t have the sudden drop in crude oil production halved from 2.2m barrels to 1.1m, we will not be in a recession. The performance would have been flat this year. It wouldn’t be a stellar performance because we came in with a low oil price and the growth of the economy tracks to oil price. By the first quarter of 2014, the GDP growth rate was 6. 21 percent. You can see the pattern. It has been going down; as oil price came down, it started going down. So, the problem didn’t start today. The problem started at the beginning of 2014, when it started going down. It went down such that, in 2015, the last administration could not even get more than 15 per cent of the budget capital. When we came in, we knew we had a difficult situation, and we said so right at the beginning. Even in my address to the Senate on the budget, I told them: ‘In 2016, tighten your belts because it is going to be a tough year’. So, we expected a very tough year. The figures were clear but not that we were going into a recession”.

Read more at: http://www.vanguardngr.com/2016/10/sell-assets-may-not-able-reflate-economy-udo-udoma/

We started being concerned about it a little while ago, which is last month, and we have been meeting at the Economic Management Team. The reason we are in recession has to do firstly, with the oil price; but oil price alone would not have pushed us into recession. Oil price went down from $110 to about $30 in the first quarter; it is now going up a bit to the 40s; but we had anticipated that, and in the budget, we projected a price of $38. And with $38, we would have generated enough revenue and enough foreign currency to keep the economy on a fairly even keel and then, next year, we start to grow. We thought that the performance this year will be flat and next year we start to grow, but what happened was that the 2.2m barrels of crude oil which we anticipated, we did not get. Because of militant activity, it dropped from 2.2bpd to 1.1bpd. So, half of our revenue went out. That revenue was also the foreign exchange supply because foreign exchange sustains the economy. And when you lose the foreign exchange, you also lose your non-oil revenue because your non-oil revenue depends on the foreign exchange from oil. So, are you saying that when you were putting together the 2016 budget, it wasn’t envisaged that we could be going into recession? No, we thought it will be a flat performance but not a recession. If we didn’t have the sudden drop in crude oil production halved from 2.2m barrels to 1.1m, we will not be in a recession. The performance would have been flat this year. It wouldn’t be a stellar performance because we came in with a low oil price and the growth of the economy tracks to oil price. By the first quarter of 2014, the GDP growth rate was 6. 21 percent. You can see the pattern. It has been going down; as oil price came down, it started going down. So, the problem didn’t start today. The problem started at the beginning of 2014, when it started going down. It went down such that, in 2015, the last administration could not even get more than 15 per cent of the budget capital. When we came in, we knew we had a difficult situation, and we said so right at the beginning. Even in my address to the Senate on the budget, I told them: ‘In 2016, tighten your belts because it is going to be a tough year’. So, we expected a very tough year. The figures were clear but not that we were going into a recession.

Read more at: http://www.vanguardngr.com/2016/10/sell-assets-may-not-able-reflate-economy-udo-udoma/