Many Nigerians were pleasantly surprised when the National Bureau of Statistics (NBS) showed that the country had exited recession, with the non-oil sector largely contributing to that feat. BENJAMIN UMUTEME in this report takes a look at the scenario.
When Nigeria’s economy entered into recession after two quarters of negative growth, many Nigerian exclaimed ‘not again!’ It meant that the country entered into another recession. Interestingly, it’s the second recession in five years as the gross domestic product contracted for the second consecutive quarter and third quarter. According to analysts, it is the worst economic decline in almost four decades.
With the country’s gross domestic product contracting for the second consecutive quarter, the National Bureau of Statistics was left with little choice but to announce that the nation’s GDP recorded a negative growth of 3.62 per cent in the third quarter of 2020. The country had earlier recorded a 6.10 per cent contraction in the second quarter.
The Nigerian economy has been battered by the coronavirus pandemic, which caused a significant decline in oil revenues as global economic activities stalled for months. Crude oil accounts for nearly 90 per cent of Nigeria’s foreign exchange earnings although it contributes less than 10 per cent to the GDP. It contributed just 8.73 per cent to the economy. Even oil production fell to 1.67 million barrels a day from 1.81 million barrels in the previous quarter.
The statistics bureau noted that the performance of the economy in the third quarter of 2020 reflected “residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the Covid-19 pandemic.”
“As these restrictions were lifted, businesses re-opened and international travel and trading activities resumed, some economic activities have returned to positive growth.”
In spite of the gloomy picture they painted, experts were optimistic that as the Covid-19 lockdowns eased and business began to hit full throttle, the country would exit the quagmire quicker than it did in 2016. While Nigeria spent its way out of recession, that may likely not be the case with this present one, analysts predicted.
The governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, had during the November 2020 Monetary Policy Committee meeting predicted that the country was going to come out of recession by the fourth quarter of 2020.
“You said that in November MPC, I was cautiously optimistic that fourth-quarter GDP will be positive thereby taking Nigeria out of a recession that I was aggressively optimistic that during the first quarter, we will exit recession. I am praying very seriously that my prayer should be heard because I know that people are waiting to put my neck on the chopping board to say that I do not know my work,” Emefiele had said.
The NBS Q4 report
In its Nigerian Gross Domestic Product Report (Q4 and full year 2020), the National Bureau of Statistics (NBS) stated that Nigeria Gross Domestic Product (GDP) grew by 0.11 per cent (year-on-year) in real terms in the fourth quarter of 2020, representing the first positive quarterly growth in the last three quarters.
Though weak, the positive growth reflects the gradual return of economic activities following the easing of restricted movements and limited local and international commercial activities in the preceding quarters.
Overall, in 2020, the annual growth of real GDP was estimated at –1.92 per cent, a decline of –4.20 percentage points when compared to the 2.27 per cent recorded in 2019.
According to the statistics bureau, real growth of the oil sector was –19.76 per cent (year-on-year) in Q4 2020 indicating a decrease by –26.12 percentage points relative to the rate recorded in the corresponding quarter of 2019. Growth decreased by –5.87 percentage points when compared to Q3 2020. Quarter-on-quarter, the oil sector recorded a growth rate of –26.27 per cent in Q4 2020. For 2020, the oil sector grew at –8.89 per cent compared to 4.59 per cent in 2019. The oil sector contributed 5.87 per cent to total real GDP in Q4 2020, down from the corresponding period of 2019 and the preceding quarter, where it contributed 7.32 per cent and 8.73 per cent respectively.
The non-oil sector grew by 1.69 per cent in real terms in Q4 2020, slower than the 2.26 per cent recorded in the corresponding quarter of 2019, but better than the –2.51 per cent growth rate recorded in the preceding quarter. For the full year of 2020 however, the non-oil sector grew –1.25% compared to 2.06 per cent in 2019.
In real terms, the non-oil sector contributed 94.13 per cent to the nation’s GDP in the fourth quarter of 2020, higher than the share recorded in the fourth quarter of 2019 (92.68%) and the third quarter of 2020 (91.27%). For 2020, the Non-Oil sector contributed 91.84 per cent to real GDP, higher than 91.22 per cent recorded in 2019.
Manufacturing sector real GDP growth in the fourth quarter of 2020 was –1.51 per cent (year on year), lower than the same quarter of 2019 and the preceding quarter by –2.75 percentage points and –0.01 percentage points respectively. Growth rate of the sector, on a quarter-on-quarter basis, stood at 5.60 per cent. For 2020, sector growth was –2.75 per cent. Real contribution to GDP in the fourth quarter of 2020 was 8.60 per cent, lower than the 8.74 per cent recorded in the fourth quarter of 2019 and the 8.93 per cent recorded in third quarter 2020. Nevertheless, annual contribution stood at 8.99 per cent in 2020.
The ICT sector also maintained its rapid growth rate in the overall year 2020 assessment, growing at 12.90 per cent, or over three times the water supply, sewerage, waste management and remediation sector, which was the next fastest growing sector of 2020 with a growth rate of 3.81 per cent.”
Walking the diversification talk
In mid 2014 when oil prices crashed to as low as $24 per barrel from a high of $114, many Nigerian knew it was only a matter of time before the country entered recession. And again, with Covid-19 driving oil prices into negative territory due to shutdown of businesses globally, Nigerians were really not surprised that the country slipped into another recession.
However, in spite of all the talk about economic diversification it remained a talk shop.
Analysts say the NBS report has further proven that the failure of successive governments to put into action its diversification agenda continues to bug down economic growth.
With its abundant land and mineral resources, relying on oil to run its expenses has long lost its appeal for many. And in this regard, the present administration stands above others as it continues to pump money into the non oil sector in its bid to cut down dependence on oil revenue.
For Uche Uwaleke, a professor of Capital Market at the Nasarawa State University, the report is an indication that the country’s economy can actually survive without the oil sector.
“The growth rate in Q4 2020 was powered by the Non-oil sector which recorded a positive growth of 1.69% despite a deep contraction in the oil sector by as much as over 19%. Information and Communications, Agriculture and Real Estate sectors were among the top performers.
“The second lesson is that the Agriculture sector remains a game changer, contributing over 24% to real GDP and posting a growth rate of 3.42% from about 1.3% in the previous quarter. This is remarkable and largely reflects the increased interventions in this area especially by the CBN. This should be sustained and possibly ramped up,” he said.
In his view, Friday Efih, an economist in, a telephone conversation with this reporter, said the report has shown that paying attention to the non oil sector will greatly help the economy teach its desired haven.
He said, “It’s good that non-oil sector contributed more to lift the economy out of recession. It has shown the government that it has no other choice than to begin to roll out policies that would further drive the growth of the non-oil sector. Nigeria cannot continue to be perpetually under the control of oil market vagaries.”
Uwaleke urged the government to focus on achieving a strong growth that is inclusive. By implication, more attention should be focused on jobs and reducing the high rate of unemployment and poverty.
“This will require, among others, an aggressive approach to increasing food output by facilitating access to credit by farmers and SMEs, collaborating with state governments to address rural infrastructure deficit as well as insecurity.
“Doing so will help bring down food inflation which is exerting the most pressure on the general price level. That the government heeded the advice of many including the CBN not to impose another lockdowns in the wake of the rising Covid-19 cases in Q4 2020 helped economic recovery.”