Decline in Economic Growth for Two Quarters Raises Concerns
The news that Nigeria’s economy expanded for the fifth consecutive time after exiting a recession, with the GDP growing at 1.50 per cent in the second quarter, should ordinarily have bolstered the hope for a better economy, but analysts pointed out that the decline in the growth rate for two consecutive quarters is worrisome. Kunle Aderinokun and Bamidele Famoofo report
Though the economy of emerged from recession more than a year ago, with Gross Domestic Product (GDP) still in the positive territory, the reality on ground is that growth has assumed a declining trend since end of fourth quarter (Q4) 2017. A drop in growth was first seen in first quarter (Q1) 2018 when the GDP growth fell to 1.95 per cent from 2.1 per cent, which closed the fiscal year 2017. Again, the National Bureau of Statistics has revealed that rather than the economy expanding, it shrank to 1.5 per cent from 1.95 per cent of Q1 2018.
“This has established a negative downward trajectory for economic growth as real GDP quarter on quarter recorded a negative growth rate of -13.2 per cent,” CEO, The CFG Advisory Ltd, Adetilewa Adebajo, pointed out in while reacting to the report on GDP performance in Q2 2018 recently published by NBS.
Adebajo observed that growth has stalled and the economic growth since coming out of recession has not come close to the three per cent (3 per cent) rate of population growth. “This has won Nigeria the global poverty capital title and in the process we have lost about US$200 billion from our GDP from a high of US$570 billion, it currently stands at US$370 billion.”
The decline in economic growth as presented by the NBS did not come as a surprise to Dr. Boniface Chizea, a Lagos-based Economist, but was worrisome. “The economy growth of 1.5 per cent year-on-year last month representing a drop from 1.9 per cent in June is worrisome but not surprising.”
According to Chizea, the level of economic growth at 1.5 percent is below the notional assumed growth in population of 3 per cent. “It is indicative of the fact that the misery index in the land would worsen even as unemployment has been currently estimated at worrisome 18.8 percent. We have in the past experienced growth in GDP that averaged 6-7 per cent. But for perceptive observers of the economy, the falling rate of GDP did not come as a surprise,” he added.
Growth Inhibitors
“The slowdown in Nigeria’s year-on-year (YoY) growth to 1.5 per cent in second quarter in 2018, from 2.0 percent in first quarter in 2018, was partly due to a 4.0 percent contraction in the oil sector, which masked stronger non-oil sector growth. It is notable that the biggest non-oil sectors – crop production, wholesale and retail trade and manufacturing – underperformed,” Economist and Head of Research, Sub-Saharan Africa, Renaissance Capital, Yvonne Mhango , revealed in a report by Renaissance Capital on the recently published GDP data for Q2.
To Adebajo, the reasons for stalled growth in Nigeria’s economy were a manifestation of the lack of stimulus due to tight monetary policy. He frowned on the banking sector not lending to sectors that will drive the economy despite good liquidity. Other reasons, which the economist advanced for the declining growth included poor fiscal and deficit management, huge debt servicing, poor budget implementation, security concerns, low purchasing power and consumer demand.
“The uncertainty the forthcoming elections bring is also not helpful, as most investors local and foreign are already taking a flight to safety”, Adebajo noted.
Chizea blamed the dwindling performance of the economy to the lacklustre attitude of political office holders to the implementation of the National budget while all attention is focused on the elections.
“The reason for this development is not farfetched as political infighting has diverted attention from the economy which to all intents has now been relegated to the background. No one now talks about budget 2018, which was presented to the National Assembly on November 7, 2017 and still in the doldrums with hardly any attention being paid to it. Any talk in this respect is focused on the budget for elections, which was surprisingly not included in budget 2018 estimates,” he lamented.
Chizea warned that no material economic growth will be achieved in 2018, if the managers of the nation’s economy do not implement the vote for capital expenditure in the budget. “And the scary situation might worsen as election related liquidity flows into the economy with the potential of increasing the rate of inflation which worsens the situation of the down trodden.” He regretted that the Economic Recovery and Growth Plan (ERGP), which is the economic blueprint of the federal government is being jettisoned for re-election ambitions. “The ERGP for which recently we witnessed some activities by way of the constitution of focus labs is now hardly on the radar of activities in the economy.”
Agriculture
According to Afrinvest Research, the slowdown in agriculture deepened in Q2 2018, as the sector