Nigeria’s trade sector seen exiting 2 years of negative growth
Nigeria’s trade sector, the second-biggest contributor to GDP, could return to positive growth in the second quarter of 2021, according to several analysts polled in a Businessday survey.
An analysis of the recently published first- quarter GDP 2021 report by the National Bureau of Statistics (NBS) shows that activities in the sector contracted by 2.43 percent in the first three months of 2021, making it the eighth consecutive quarterly contraction since the second quarter of 2019.
Despite the sector being in negative territory, there has been continued moderation in the magnitude of contraction since the third quarter of 2020, which partly reflects the gradual reopening of the economy and the re-opening of the land borders.
“The sector is likely to grow in the second quarter because of increasing trading activities, opening of the land borders, and there is more foreign exchange available even though the rate has depreciated,” notes Bismarck Rewane, CEO, Financial Derivatives Company Limited.
Ayorinde Akinloye, a consumer analyst at United Capital plc, also expects the sector to expand in the second quarter but is of the view that it would be primarily driven by low-base effects.
“The biggest driver of growth that we will see in the second quarter across boards will be because of low-base effect, the tendency of a small absolute change from a low initial amount to be translated into a large percentage change,” Akinloye says.
If the trade sector does however expand in the second quarter based on the assumptions of the polled analysts, it would still leave much to be desired as it would not be due to an improvement in consumer purchasing power, according to Damilare Asimiyu, an analyst at Afrinvest Securities Limited.
“The sector will record posi
tive growth not because consumers’ purchasing power or other bottlenecks have improved but because of the base effect of Q2 last year. We are looking at about 1.8 percent growth in the trade sector for Q2,” Asimiyu states.
The trade sector, which contributes roughly 15-16 percent to the GDP, has been touted by economists as an important tool in the quest for sustainable and inclusive economic development. It also contributes 16.9 percent to total employment, according to NBS data.
The sector, which can be likened to the barometer of consumer purchasing power, has been in and out of negative growth territory since 2016, but at a marginal level over myriad challenges ranging from unpredictable government policies to weak consumer demand.
Moses Ojo, a Lagos-based economic analyst, however does not believe that the sector would expand in the second quarter due to its lingering challenges, logistic issues in clearing goods from the Apapa ports, exchange rate volatility, and weaker purchasing power. “It may take longer. Until all these issues are addressed, it may take longer for the sector to return to positive growth,” Ojo says.
Nigeria has been battling substantial increases in unemployment, high inflation, poverty, among others, which are some of the economic factors that characterise depression.
Around 82.9 million Nigerians are extremely poor, constituting 40.1 percent of the total population with real per capita expenditure below N137,430 in 2019, according to the NBS’S Poverty and Inequality report in May 2020. The World Bank predicted that there would be 95.7 million Nigerians living below the poverty line by 2022.