Two years after it grew out of recession, the economy consistently maintains upward growth. Driven predominantly by activities in oil and non-oil sectors, the growth is dwarfed by significantly rising unemployed population. Abdulwahab Isa reports
Africa’s largest economy shrank by 1.5 per cent in 2016, recording its first annual contraction in 25 years.
It also declined first quarter of 2017 due to lower oil revenue and a shortage of hard currency.
The economy witnessed relief in first quarter 2017.
Government deployed a combination of fiscal and monetary policy instruments, which eventually reversed the slide.
Nigeria’s economy grew out of recession in the second quarter of 2017, expanding 0.55 per cent year-on-year, National Bureau Statistics had said at the time.
Two years after it emerged from recession, the economy has grown.
According to latest GDP report release by National Bureau Statistics (NBS) for Q3 2019, the economy recorded marginal growth across all the sectors.
The growth came amidst inflationary pressures in food prices.
Sluggish growth:
Latest GDP report by NBS indicates that the economy, consistent with its pattern, recorded slight growth in third quarter of 2019.
It grew by 2.28 per cent (year-on-year) in real term.
The growth rate in Q3 2019 represents the second highest quarterly rate recorded since 2017 when Nigeria economy emerged from recession.
Compared to third quarter of 2018, which recorded a growth of 1.81 per cent, the real GDP growth rate observed in the third quarter of 2019 indicates an increase of 0.47 per cent points.
Relative to the second quarter of 2019, which recorded a growth rate of 2.12 per cent, Q3 2019 represents an increase of 0.17 per cent points.
“On a quarter on quarter basis, real GDP grew by 9.23 per cent. The growth rate in Q3 2019 represents the second highest quarterly rate recorded since 2016. In the quarter under review, aggregate GDP stood at N37,806,924.41 million in nominal terms. This performance is higher compared to the aggregate of N33,368,049.14 million recorded in the third quarter of 2018, representing a year on year nominal growth rate of 13.30 per cent,” NBS said.
Oil sector real growth was 6.49 per cent (year-on-year) in Q3 2019 indicating an increase of 9.40 per cent points relative to rate recorded in the corresponding quarter of 2018. The rate was , however lower by –0.68 per cent points when compared to Q2 2019 which was 7.17 per cent.
The current output, according to data agency, was 0.1mbpd higher than the daily average production of 1.94mbpd recorded in the same quarter of 2018, and 0.02mbpd higher than the revised oil production levels in Q2.
Similarly, the non- oil sector recorded significant growth going by NBS latest GDP data. Non-oil sector grew by 1.85 per cent in real terms during the reference quarter. This is –0.48 per cent points lower when compared to the rate recorded in the same quarter of 2018 but 0.20 per cent points higher than the second quarter of 2019.
Major drivers of non-oil sector include agriculture, mining & quarrying, information and communication sub- sector; transportation and storage.
Effect of border closure
Desirous of protecting the economy against flagrant dumping of substandard foreign goods , the Federal Government shut its land borders to Republic of Niger, Ghana and Cameron respectively.
The closure, which took effect August 2019, put seal to entry of foreign rice and other commodities, hitherto, being smuggled into Nigeria via land borders.
Government gesture gave the economy the breathing space it needed to grow. Production of local rice has received huge patronage. It has spurred massive employment across rice value chain production leading to expansion and growth in GDP.
Speaking to New Telegraph on implication of border closure and the gains on economy with reference to third quarter, 2019 GDP growth, development economist, Odillim Enwegbara, noted that no nation opened her borders to every country without restraint.
“The growth is real. I won’t tell you it is not; It’s possible. That’s one of the benefits of border closure. Unrestricted borders is at the core of her economic problem. Border closure isn’t the only causes of Nigeria economic problems but it’s one of the major causes.
“If you allow every manner of good and services to be dumped in your economy space, it would restrict real economic activities that would have taken place in your country. So, is a welcome development and I’m looking at Nigeria economy moving from single digit to double digits. Who says it can’t happen? But we all have to be part of economic growth plan,” he noted.
Odillim said the GDP growth signalled rebound in local investment, adding that a lot would still have to done to bolster and deepen the economy.
“Confidence is returning, but there is still issues regarding foreign investors. What’s happening is that, we are taking advantage of border closure, which was supposed to have been closed a long time.
“There won’t be any investor confidence in economy when we have this kind of insecurity problem. The security problem must be dealt with. No government expects growth, rapid industrialisation when there is major problem with security; goods and services and human being can’t move freely because of fear of the unknown,” he said.
Also commenting on GDP growth, budget analyst, and Lead Director, Centre for Social Justice, Eze Onyekpere, said the growth was insignificant and unable to fill the gap created by huge unemployed hands.
He noted that while the GDP growth was an increase over previous one, it was a tepid growth, a figure yet to meet the spiraling population rise.
According to him, “although the 2.28 per cent GDP growth is an improvement on the performance from previous quarters, it is rather tepid. It is yet to meet the population growth figure of about three per cent per annum.
“Considering Nigeria’s poor credentials in inclusive and sustainable growth, new policy measures are needed to drive economic growth to not less than eight per cent per annum, with a road map to sustain this kind of growth for not less than ten years. This is possible if the political will is combined with getting the best hands to run the economy and thinking through policy measures before they are implemented.”
Danger of unemployment
A recently released World Bank report indicated Nigeria’s high unemployment rate dwarfed her economic growth
Titled “Jumpstarting Inclusive Growth: Unlocking the Productive Potential of Nigeria’s People and Resource Endowments,” the global bank in the report projected growth to pick up from 1.9 per cent in 2018 to two percent in 2019 and 2.1 per cent in 2020-21.
It described growth recorded by Nigeria economy as insufficient, noting that growth outlook was vulnerable to external and domestic risks, including geopolitical and trade tensions that may affect inflows of private investment.
According to the report, Nigeria has the opportunity to advance reforms to mitigate risks amid growing public demand for greater economic opportunities.
It added that Nigeria’s labor force was growing rapidly, stating that in 2018 alone, over five million Nigerians entered the labor market. This resulted in 4.9 million more unemployed people in the last year. While some states recorded feats in the area of job creation, the jobs were not enough to absorb the number of fresh entrants to the labour market.
“Positive news are emerging from some states that are creating enough jobs to keep up with the growth of their labor forces. In the year following the recession (between the first quarter of 2017 and the first quarter of 2018), 10 states saw some positive job creation, but the number of new jobs was not enough to absorb the new entrants into the labor force.
“The situation improved by the third quarter of 2018, as four states (Lagos, Rivers, Enugu, and Ondo) created more jobs than the entrants to the labor market, and as a result these states reduced unemployment,” the bank said.
Commenting on the latest report, World Bank Country Director, Shubham Chaudhuri, said the reforms would help achieve faster, more inclusive, and sustained growth with jobs.
“Building on recent efforts, going forward, we recommend actions in priority areas, including increasing fiscal revenue and improving the quality of spending to manage oil-sector volatility, investing in much-needed human capital and infrastructure, and improving the business climate to unlock private investment and tackle Nigeria’s jobs challenge.”
“The report discusses ways to boost the productivity and resilience of the Nigerian economy, including: leveraging trade integration to harness the benefits of the Africa Continental Free Trade Area; improving the efficiency of spending in education; monitoring the impact of conflict to protect the poor and vulnerable; and leveraging digital technologies to diversify the economy and create jobs for young workers. “Investing in people and removing barriers that make it difficult for new firms to compete and grow will encourage entrepreneurship and innovation, spur job growth, and ultimately reduce poverty,” said Chaudhuri.
Last line
There is danger lurking around the economy unless drastic steps and concrete measures are taken to match GDP growth with creation of sufficient jobs that will engage the rising population.
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