Nigeria has sunk into its second recession in less than five years, as the Covid-19 pandemic and oil price crash squeeze its hydrocarbon industry. Crude oil production shrunk by 3.6% in the third quarter of 2020, after declining 6.1% in the second quarter, according to official data. Gross domestic product (GDP) is expected to contract by 3.8% in 2020, according to S&P Global.
The oil and gas sector in Nigeria accounts for more than 85% of export receipts and at least half of fiscal revenue. Combined with its sensitivity to currency depreciation and high inflation, this exposes banks to high economic imbalances and short credit cycles, wrote Samira Mensah, a credit analyst at S&P Global in a recent report.
