BY EMEKA EJERE
There have been more doubts than excitement among economic enthusiasts since Friday when the National Bureau of Statistics (NBS) declared that the Nigerian economy recovered from recession in the last quarter of 2020.
The nation’s economy had slipped into a recession in November after its gross domestic product (GDP) contracted for the second consecutive quarter. However, figures released Friday by the NBS showed that Nigeria’s Gross Domestic Product (GDP) grew by 0.11 per cent (year-on-year) in real terms in the fourth quarter of 2020, representing the first positive quarterly growth in the last three quarters.
In other words, the country’s GDP grew 0.11 per cent in the three months through December from a year earlier, compared with a decline of 3.6 per cent in the third quarter. This has generated controversy, with most analysts on the side of doubts.
The misgivings are majorly driven by the reality on ground which many believe does not suggest that the economy is in anyway better than when it was said to be deep in recession, considering certain economic indicators which they say betray the official figures released by the statistics office.
Nigeria’s core inflation rate rose to 45-month high of 16.47 per cent while food inflation stood at 20.59 per cent in January 2021 with resultant erosion of citizens’ purchasing power amid high rate of unemployment and poverty. .
There are also concerns about the country’s other structural problems in the form of foreign exchange pressures, relatively lower oil prices and production, subdued global demand, weak investor confidence, worsened insecurity and social tensions.
The exchange rate between the naira and the dollar depreciated slightly on Wednesday, February 17, closing at N410/$1 at the NAFEX (I&E window) where forex is traded officially. This is as the naira hit N423.15/$1 during the trading day despite the global oil prices crossing the $64 mark.
The rate of N410/$1, represents a 0.08% drop when compared to the N409.67/$1 recorded at the end of trade on Tuesday, February 16, 2021. This also represents a seventh straight trading day the Naira closed in the N400/$1 region.
Similarly, at the parallel market where forex is traded unofficially, the naira depreciated closing at N478/$1 on Wednesday, February 17, representing a 1.06% drop when compared to the N473/$1 that it closed at the previous trading day
Also, Nigeria’s external reserves lost $124 million in three days as it fell to $35.633 billion as of February 15, 2021, from $35.757 billion as of February 12, 2021, according to data from the Central Bank of Nigeria (CBN)..
Though weak, Nigeria’s exit from recession was driven by the non-oil sector, especially the Information and Communication (Telecommunications & Broadcasting). Other drivers were agriculture (crop production), real estate, manufacturing (food, beverage & tobacco), mining and quarrying (quarrying and other minerals), and construction.
On the contrary, average daily oil production of 1.56 million barrels per day (mbpd) was recorded in the fourth quarter, lower than the daily average production of 2.00mbpd recorded in the same quarter of 2019 by -0.44mbpd and the third quarter of 2020 by – 0.11mbpd.
In real terms, the non-oil sector contributed 94.13 per cent to the nation’s GDP in the fourth quarter of 2020, higher than the share recorded in the fourth quarter of 2019 (92.68 per cent) and the third quarter of 2020 (91.27 per cent). For 2020, the non-oil sector contributed 91.84 per cent to real GDP, higher than 91.22 per cent recorded in 2019.
While the Q4 2020 growth rate was lower than growth rate recorded the previous year by -2.44 per cent points, it was higher by 3.74 per cent points compared to Q3 2020. On a quarter on quarter basis, real GDP growth was 9.68 per cent indicating a second positive consecutive quarter on quarter real growth rate in 2020 after two negative quarters
Overall, in 2020, the yearly growth of real GDP was estimated at -1.92 per cent, a decline of -4.20 per cent points when compared to the 2.27 per cent recorded in 2019.
Speaking with Business Hallmark, a development economist, Barr Fred Nzeako, described the NBS figures as political statistics that do not reflect the reality, He wondered how the economy can be said to be out of recession when all the signs of recession are getting even worse.
Nzeako said, “NBS statistics about Nigeria’s economic situation are not convincing because looking at the economic indices – prices of goods, level of productivity, exchange rate, foreign reserve and so on, nothing has improved. Then how can you say the economy is out of recession when all the signs of recession are still there.?
“So it is a political statistics that is not in tandem with realities,”
Similarly, Professor of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Sheriffdeen Tella, stated that Nigeria is still in recession. He said that a country’s entry or exit into or out of recession is not measured by the performance of one variable.
He said: “In fact, the recovery in the GDP was not noticeable in the economy. Up till now, inflation is still high and rising, unemployment still high and exchange rate remains unstable and highly depreciated.
“The NBS should know all these and report accordingly, so that policy makers will know they have much to do to bring the economy out of the recession. Professionalism should not be sacrificed for politics. Nigeria is still currently in recession but recent increase in price of crude oil may reduce the stress if the improved finance is well managed.”
On his part, vice president of Highcap Securities, David Adonri described the recovery as dramatic, considering that from minus six per cent in Q2, within six months, GDP has bounced to plus 0.11 per cent.
“It is a pleasant surprise that Nigeria has exited recession. Although the 0.11 per cent GDP growth recorded in Q4, 2020 is quite insignificant, it is a great relief. It took Nigeria over one year to recover from 2016 recession when GDP fell to minus 1.73 per cent.
“There might be serious questions about this quick turnaround, considering that, unlike in the past, the agricultural and manufacturing economies were seriously in limbo during Q4, 2020 due to intensified farm insecurity and shortage of forex respectively.
“Escalated cost of production due to increase in prices of fuel and electricity was a downside factor in disfavor of growth. It may be premature to jump into conclusions until the breakdown of sectoral contributions are carefully analyzed. In the meantime, let us bask in the euphoria of this development, which resembles a fairy tale.”
Members of the Organised Private Sector (OPS), including the Lagos Chamber of Commerce and Industry (LCCI), said that output contraction recorded in year 2020 further highlighted the country’s weak macroeconomic fundamentals and the persistent structural, policy and regulatory issues in the economy.
The Director General of LCCI, Dr Muda Yusuf said, “Apart from declining growth, the economy is currently confronted with several challenges, including rising consumer prices (inflation now at 45-month high of 16.47 per cent in January 2021), weak employment level, persisting liquidity concerns in the foreign exchange market, high poverty incidence, weak investor confidence and insecurity, among others.
“These challenges, which had been part of the country’s economic narrative prior to the pandemic, were amplified by the COVID-19 induced disruptions.
“We, however, recommend that clarity in government’s policy direction is critical in deepening investor confidence. Efforts should be mobilised in making the business environment more conducive for MSMEs and large corporates by addressing structural bottlenecks and regulatory constraints contributing to high cost of doing business.”
Meanwhile, the ruling All Progressives Congress (APC) has described Nigeria’s reported exit from recession as a product of sound economic policies and not of voodoo economics or a fluke.
A statement issued Thursday in Abuja by the National Secretary of the party’s Caretaker/Extraordinary Convention Planning Committee (CECPC) read in part; “The National Bureau of Statistics (NBS) report of Nigeria’s exit from recession in the fourth quarter of 2020 gives credence to the fact that the President Muhammadu Buhari-led government walks the talk on its promises to Nigerians and Next Level plans for the country.
“President Buhari promised Nigeria will exit economic recession within a short time. That promise has been kept.
“Commendably, Nigeria’s exit from recession is the country’s first growth in three quarters amid the Coronavirus restrictions and consequent economic slowdown. It was not a fluke but as a result of well-planned measures lined up by the federal government to ensure a quick exit.”