With Positive Q2 GDP Data, Improving Business and Political Climates Necessary for Strong Growth
While still basking in the euphoria of positive GDP growth, achieved in the second quarter, the federal government has been tasked to work harder to sustain the trajectory and translate the figures to tangible economic benefits for ordinary Nigerians, rep
After a protracted crisis, the Nigerian economy mustered its first growth in the second quarter. The economy, as reported by the National Bureau of Statistics, at the end of the quarter, emerged out of recession, which it entered in the second quarter of 2016, having moved to the positive territory of growth, exactly a year after. According to NBS, the gross domestic product (GDP) in Q2 2017 grew by 0.55 per cent (year-on-year) in real terms, showing an increase of 2.04 per cent over the rate recorded in the corresponding quarter of 2016 ( –1.49 per cent). The growth was also higher by 1.46 per cent points from rate recorded in the preceding quarter, (revised to –0.91 per cent from –0.52 per cent). Quarter on quarter, real GDP growth was 3.23 per cent.
BREAKDOWN
Accounting for a significant boost to the GDP growth was the oil and gas sector, which the statistics agency pointed out, grew by 1.6 per cent year on year in Q2 2017 compared to the -11.6 per cent year on year of the corresponding quarter in 2016. The relative peace and stability in the oil-rich Niger Delta over a period of time provided the requisite fillip for oil production, in particular and the economy, in general.
During the review quarter, oil production was estimated to have averaged 1.84 million barrels per day (mbpd), which was 0.15 million barrels higher than the daily average production recorded in Q1 2017. Oil production during the quarter was higher by 0.03 million barrels per day relative to the corresponding quarter in 2016, which recorded an output of 1.81 mbpd.
Besides, the non-oil sector, which in real terms, represented 91.11 per cent share of the GDP, grew by 0.45 per cent in the review quarter, which was 0.83 per cent higher than the rate recorded in the corresponding quarter in 2016 and -0.28 per cent point lower than in the first quarter.
The major drivers of growth in the non-oil sector were agriculture, finance & insurance, electricity, gas, steam and air conditioning supply and other services. Agriculture showed strong trend of growth, increasing by 3.01 per cent in Q2 2017, from 3.39 per cent in Q1 2017 and 4.53 per cent in Q2 2016.
Likewise, manufacturing maintained its positive growth for the second consecutive quarter in Q2 2017, growing at 0.64 per cent compared to 1.36 per cent in Q1 2017 and -3.36 per cent in Q2 2016. While trade which has a dominant share of GDP remained negative at -1.62 per cent, the contraction in the sector decelerated from the -3.08 per cent recorded in Q1 2017.
Besides, electricity, gas, steam and air conditioning supply, and financial institutions sectors also recorded strong growths, with electricity, gas, steam and air conditioning growing by 35.5 per cent in real terms, compared to -5.04 per cent in Q1 2017 and -10.46 per cent in Q2 2016 and financial institutions growing by 11.78 per cent in Q2 2017, compared to 0.60 per cent in Q1 2017 and -13.24 per cent in Q2 2016.
The results also showed that the industry sector grew positively by 1.45 per cent in Q2 2017, after nine consecutive quarters of negative growth since Q4 2014.
When measured as a percentage of GDP, services retained the bulk of the GDP at 53.73 per cent in Q2 2017, down by 1.94 per cent points (55.67 per cent) from the first quarter of 2017 and 54.80 per cent in Q2 2016. Industries accounted for 23.31 per cent of GDP, compared to 22.90 recorded in Q1 2017 and 22.65 per cent in Q1 2016 while agriculture accounted for 22.97 per cent of GDP in the quarter under review, compared to 21.43 per cent in Q1 2017 and 22.55 per cent in Q2 2016.
BEYOND EXPECTATION
For the 12 months that the economy was in the woods, several projections, estimations and postulations were made by experts on the fate of the economy. While most of them had predicted that Nigeria would finish the year with a positive GDP growth rate, the economy exited recession faster than they had calculated.
For instance, both the International Monetary Fund and the Economist Intelligence Unit had projected that the economy would grow by 0.8 per cent by the end this year. But the CBN had also forecast that the economy would exit recession in the third quarter of this year.
Indications that the economy would exit recession faster than envisaged were, however, rife with the improved capital importation figures for Q2 2017 released by NBS.
CAUTIOUS OPTIMISM
The news of the economy emerging from recession was greeted with cautious optimism by the federal government. The government was concerned that despite the positive feat recorded, the growth remained fragile and vulnerable.
The Economic Adviser to the President, Dr. Yemi Dipeolu, cautioned that the economy remained vulnerable to “exogenous shocks or policy slippages.”
Dipeolu, who said the end of the recession was welcome, reasoned nonetheless that it was imperative to intensify the implementation of the Economic Recovery and Growth Plan (ERGP) as well as diversification of the economy to achieve the desired results.
According to him, “Overall, the end of the recession is welcome but economic growth remains fragile and vulnerable to exogenous shocks or policy slippages. Accordingly, it remains essential to intensify efforts going forward on the implementation of the ERGP to achieve desired outcomes including sustained inclusive growth, further diversification of the economy, the creation of jobs and improved business conditions.”
Dipeolu, who stated that the GDP figures gave cause for “cautious optimism” in the face of falling inflation, pointed out that unemployment and food inflation have remained high as a result of the cost of transportation and what he described as seasonal factors.
“The GDP figures give grounds for cautious optimism, especially as inflation has continued to fall from 18.72 per cent in January 2017 to 16.05 per cent in July 2017.
“Foreign exchange reserves have similarly improved from a low of $24.53 in September 2016 to about $31 billion in August 2017.
“Unemployment, however, remains relatively high, but job creation is expected to improve as businesses and employers increasingly respond more positively to the significantly improving business environment and favourable economic outlook.
“Besides, as key sectoral reforms in both oil and non-oil sectors gain traction, the successful implementation of ERGP initiatives such as N-Power and the social housing scheme will boost job creation.
Amid the caution also came the statement by President Muhammadu Buhari that the real impact of the end of recession would be better felt when ordinary Nigerians experience a meaningful improvement in living standards.
According to the statement by his spokesman, Malam Garba Shehu, Buhari spoke while receiving the President of Niger, Alhaji Mahamadou Issoufou, in Daura, Katsina State.
Shehu noted that Buhari was “very happy”