By FELIX OLOYEDE
Government cannot roll out drums yet despite Nigeria’s economy recording two consecutive growths after lingering in recession for 16 months, because the recovery was still largely driven by crude oil, while real sector is still in lull, experts have counselled.
Data released by the National Bureau of Statistics (NBS) last week showed that in the third quarter of 2017, there was a 1.4 per cent year-on-year expansion in the country’s Gross Domestic Product (GDP), which measures productivity. This was a revision to 0.72 per cent from 0.55 per cent growth reported in the previous quarter and largely propelled by 25.89 per cent and 3.06 per cent y-o-y real growth in the oil sector and agricultural sector respectively in Q3 2017.
The growth in the oil sector was underpinned on significant rise in crude oil price, which was over $63 per barrel on Friday and the relative peace enjoyed in the Niger-Delta, which has seen the country production output reached over 1.8 million barrels by day.
“This growth is 3.74 per cent points higher than the rate recorded in the corresponding quarter of 2016 (-2.34 percent) and higher by 0.68 percent points from the rate recorded in the preceding quarter, which was revised to 0.72 percent from 0.55 percent (Q2 was revised following revisions by NNPC to oil output and hence led to revisions to Oil GDP). Quarter on quarter, real GDP growth was 8.97 per cent.
“In the quarter under review, aggregate GDP stood at N29,451,303.99 million in nominal terms higher when compared to N26,537,651.01 million in Q3 2016, resulting in a Nominal GDP growth of 10.98 per cent. This growth is higher relative to growth recorded in Q3 2016 of 9.15 percent,” the statistics agency stated in its report.
Dr Vincent Nwani, Director, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI) noted that though the acceleration in the GDP signals returning foreign investors’ confidence in the Nigerian economy, the large oil influence in this growth was an indication the country was not making significant progress in its quest to diversify the economy. He argued that this was worrisome because the future of oil is becoming uncertain as new technology is taking a serious hit on the sector.
“In the medium to long term, we still have issues, but in the short term, the reassurance that the Nigerian economy has grown in two consecutive quarters in a positive trajectory is good news,” the economist opined.
He mentioned that this trend indicates that Nigerians won’t start 2018 in a crawling level, but, however, urged the government to intensify efforts to further improve the business environment in the country.
“We have seen growth in the first and second quarters, we are looking at 2 per cent growth for 2017,” Nwani projected. The government projected real GDP growth of 2.19 per cent in 2017 and 4.8 per cent for next year.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), which held its last meeting for 2017 last week and maintained status quo in interest rate and other monetary ratios, detailed in its communique that contraction witnessed in many subsectors of the non-oil sector, which sank -0.76 per cent in Q3 2017 gives “credence to the argument that more work is required to consolidate the recovery process by putting in place policies that will boost growth through the non-oil sector.”
The manufacturing, construction and trade sectors contracted -2.85 per cent, -0.46 per cent and -1.74 per cent respectively y-o-y.
The government has reiterated its commitment to diversify the country’s economy from crude oil, which accounts for over 90 per cent of its foreign exchange earnings and investment heavily in infrastructure. The National Assembly last week began deliberations on the 2018 budget, which will see the government spend N8.6 trillion, 16 per cent higher than N7.3 trillion budgeted for 2017.
Recurrent expenditures are expected to gulp N3.494 trillion; debt servicing N2.014 trillion and capital expenditure of N2.43 trillion. Analysts have expressed concern over the N2.01 trillion deficits in the budget proposal as the country currently spends 66 per cent of its revenue on debit serving.
With economy growing less than 2 per cent, while population is accelerating at about 3 per cent this is a source of worry, reasoned Dr Boniface Chizea, managing director, BIC Consulting Services Limited in a telephone conversation with BusinessHallmark.
“If we continue at this rate, it means poverty in the land would be worsened. It is means there is deterioration in the quality of life of the people, so we can’t celebrate yet,” the economist argued.
“But we can celebrate the fact that there is a ray of light at the end of recession tunnel.” He forecast that Nigeria’s economy is likely to grow slightly below 2 per cent at the end of the year.
The government needs to concentrate more efforts towards stimulating the real sector if it hopes to tackle the huge unemployment challenge bedeviling the country, claimed Mr Ambrose Oruche, an economist and Director, Corporate Affairs, Manufacturers Association of Nigeria (MAN). He believes there is urgent need to lower interest rate, which currently stands at 14 per cent and increase manufacturers’ access to credit to enable the real sector, which is still in recession recover.
Last year, there was massive job loss as manufacturers struggled to access forex due to the acute shortage occasioned by significant drop in oil price, which fell to $27 in February 2016 after reaching $117 in July 2014. The naira has, however, stabilized after the apex bank started intervening in the forex market in February and introduced the Nigerian Autonomous Foreign Exchange (NAFEX) window in April, but unemployment is still a major challenge, standing at 14.2 per cent with over 29 million Nigerians out of job.