.As ex-LCCI boss urges FG to de-risk investment in real sector
.It’s an improvement on previous growth—-Nzekwe
Reactions have continued to trail the recent Gross Domestic Product, GDP report by the National Bureau of Statistics (NBS), in which Nigeria’s GDP grew by 4.03% (year-on-year) in real terms in the third quarter of 2021, showing a sustained growth over the last four quarters since the recession witnessed in 2020.
In an email response to Daily Champion, Dr Muda Yusuf, Economist/CEO, Centre For The Promotion Of Private Enterprise [CPPE] said despite the 4.03% GDP growth recorded in the third quarter of 2021 which marked the fourth consecutive quarters of GDP growth since the exit of Nigeria from recession in Q4 2020,there are lingering concerns around the inclusiveness of the growth and the productivity of the non-oil sector of the economy which accounts for 92.51% of the GDP.
According to him, these concerns are underpinned by the weak contribution of the non-oil sector to foreign exchange earnings, revenue and quality jobs. It is also underscored by the weak global competitiveness of the non-oil economy.
He said key challenges confronting the non-oil sector are issues bordering on the macro economic instability, currency depreciation, forex liquidity, regulatory constraints, policy inconsistency, security of lives and property, structural bottlenecks and barriers to import and export trade and burdensome bureaucracy.
Meanwhile, the recent positive growth trend in the GDP could be attributed to the following: Rebound of domestic economic activities following the relaxation of restrictions on economic activities and movement within the country, revitalization of sectors that were earlier on lockdown following the onset of the COVID-19 pandemic such as the hospitality, entertainment, aviation, road transportation, tourism, among others. The restoration of supply chains that were disrupted at the inception of the pandemic.
Others are: “Recovery of the global economy following improvements in investors sentiments as a result of improved vaccination in many parts of the world; rebound of commodity prices which had a positive impact on macro-economic outlook; crude oil price for instance has recorded an impressive recovery in last couple of months. Base effect as a comparative benchmark for the computation of GDP was period of recession and Economic stimulus programmes by monetary and fiscal authorities.
On the Sectoral contributions to GDP and economic implications, he said according to the Q3 GDP report, the contributions of sectors to GDP are as follows: Agriculture: 29.94%; crude oil and gas: 7.49%; manufacturing: 8.96%; trade 14.93%; telecom and ICT: 11.94%.
“The non-oil sector accounts for 92.51% while the oil sector accounts for 7.49%. This is a reflection of the dominance of the non-oil sector. It is also a reflection that economic players are much more active and involved in the non-oil economy.
“However, the paradox is that the oil sector still accounts for over 50% of revenue and over 90% of our foreign exchange earnings. This is a manifestation of the low level of productivity in the non-oil sector. Therefore, reforms are imperative to scale up productivity in the non-oil sector of the economy in order to enhance its contributions both to revenue and foreign exchange earnings. This is the way to make the economy more sustainable and stable”.
He noted that there is a need to de-risk investment in the real sector of the economy to reduce the dominance of the service sector in the economy.
“We cannot afford an economy that is very weak in production and the associated competitiveness challenges. This is the sustainable pathway to promote the self-reliance and backward integration agenda”.
Also, he affirmed that there should be deliberate policy to plug into the global value chain rather than be consumed in building a wall around the domestic economy.
‘’There is need for periodic impact analysis of policy measures and intervention programmes to ensure the delivery of desired outcomes. Also, there should be regular engagement with stakeholders across sectors to get feedback from investors and stakeholders in order to gather empirical evidence to enhance the quality of fiscal and monetary policies. Such interactions are also imperative for regulatory feedback”.
In separate reaction, a former President, Association of National Accountants of Nigeria (ANAN), Dr. Samuel Nzekwe described the 4.03 per cent growth recorded in the nation’s economy in the third quarter of 2021 as a build up on the one the 5 per cent recorded in the previous quarter.
Nzekwe who, noted that growth is not too bad said there is a need to ensure that there will be incremental growth in the GDP on a quarterly basis.
He said, “We should see how to improve productive capacity in the country. The only way to bring the value of Naira back is for us to increase productivity.By next year, if nothing is done, we may have the problem with food security. There is a need for the federal government to work on insecurity so that people can go to farm again. Farmers are now at the IDP camps and they can’t go to the farm, insecurity is part of the problems we are having in the economy.
“There is also a need for a conducive environment for businesses to thrive. Immediately we sort these things out, the GDP will grow. I am happy that it is not minus, that would have been terrible,” he said.
Statistician-General of the Federation and Head of National Bureau of Statistics (NBS), Dr Simon Harry, last week said that the nation’s economy grew by 4.03 per cent in the third quarter of 2021.
Harry explained that the negative GDP figures recorded in 2020 as a result of the COVID-19 pandemic had serious base effects on the GDP figures for quarters two and three of 2021
“You will recall that the contraction of quarters two and three of 2020 has resulted to positive growth as recorded consecutively for the last three-quarters of quarter four, 2020 with 0.11 per cent, quarter one, 2021 with 0.51 per cent and quarter two, 2021 with 5.01 per cent.
“This base effect continued to quarter three of 2021 recording a growth of 4.03 per cent.”
He stated that the improvement is seen in the output growth over the last four quarters depicts steady progress made in stemming the Covid-19 pandemic and the associated negative impact on livelihood, well-being, and the economy.
“Globally, many countries have witnessed an improvement in economic performances compared to 2020 when Covid-19 was endemic.
“Thus, economic recovery is a gradual process that requires consistent collective efforts to improve economic activities across the institutional sectors.
“However, in Nigeria, the prospect of full recovery is glaring provided the current trend of improved economic performance is sustained in the rest of the year and beyond. It is important to also mention that annual GDP growth of 2021 stands at -1.92 per cent,” said.
The overview of the report noted that aggregate GDP stood at N45.113 trillion in the nominal terms, a performance higher when compared with the third quarter of 2020, which recorded aggregate GDP of N39.089 trillion, indicating a year-on-year nominal growth rate of 15.41 per cent.
It classified the Nigerian economy into the oil and non-oil sectors.
For the oil sector, the report said that the nation, in the third quarter of 2021 recorded an average daily oil production of 1.57 million barrels per day (mbpd).
This, it said, was lower than the daily average production of 1.67mbpd recorded in the same quarter of 2020 by 0.10mbpd and lower than the second quarter 2021 production volume of 1.61mbpd by 0.05mbpd.
It also said that the real growth of the oil sector was –10.73 per cent (year-on-year) in quarter three of 2021, indicating an increase of 3.16 per cent relative to the rate recorded in the corresponding quarter of 2020.
It added that the oil sector contributed 7.49 per cent to total real GDP in the quarter, down from figures recorded in the corresponding period of 2020 and up compared to the preceding quarter, where it contributed 8.73 per cent and 7.42 per cent respectively.
For the non-oil sector, the NBS said that it grew by 5.44 per cent in real terms during the reference quarter, higher by 7.95 per cent compared to the rate recorded in the same quarter of 2020 and 1.30 per cent lower than the second quarter of 2021.
“This sector was driven in third quarter 2021 mainly by trade, Information, and Communication (Telecommunication), other drivers include financial and insurance (financial institutions) and manufacturing (food, beverage, and tobacco).
It said, “Others are agriculture (crop production) and transportation and storage (road transport), accounting for positive GDP growth.
”In real terms, the non-oil sector contributed 92.51 per cent to the nation’s GDP in third quarter 2021, higher from share recorded in the third quarter of 2020 which was 91.27 per cent and lower than the second quarter of 2021 which recorded 92.58 per cent.”
GDP helps to determine the structure and dynamics of an economy, which by implication measures the performance of the economy within a given period of time.
culled from Champion
