Nigeria: At 2.55 Percent in Q4, Nigeria Records Highest Economic Growth Since 2016

A commercial tricycle operator operating along Tafawa Balewa Square in Lagos Nigeria (file photo).
25 February 2020

Nigeria's economic growth rate rose to 2.55 per cent in the fourth quarter of 2019, its highest quarterly growth since the 2016 recession, according to a report released yesterday by the National Bureau of Statistics (NBS).

In the report, the country's Gross Domestic Product (GDP) growth rate for the fourth quarter of 2019 rose by 2.55 per cent (year-on-year) in real terms compared to 2.28 per cent in the preceding quarter.

Also, the economy grew by 2.27 per cent in full year 2019, compared to 1.91 per cent recorded in the preceding year.

The NBS released the economic performance indicators on the same day the federal government promised to give more incentives to strengthen the economy and the capital market.

The full year 2019 GDP figure was slightly above the International Monetary Fund (IMF) forecast of 2.1 per cent.

Nevertheless, the latest GDP figures were still below Nigeria's population growth rate of about three per cent, thereby prompting analysts that spoke with THISDAY to urge the federal government to address the structural imbalances constraining rapid GDP growth in the country.

The analysts also advised the government to take advantage of the opportunities in the agro-processing/value addition and the bio-economy to create employment for the youth.

They warned, however, that in spite of the improved performance in the economy, the difficult times may be far from being over unless current issues are addressed to pave the way for growth.

According to the GDP Report for Q4 and full year, released by the statistical agency, aggregate GDP in Q4 stood at N39.57 trillion in nominal terms, higher than the N37.80 trillion in Q3 and N35.23 trillion recorded in the corresponding quarter of 2018.

GDP in real terms stood at N19.53 trillion.

The NBS stated that the strong growth in Q4 represented the highest quarterly growth performance since the 2016 recession.

However, quarter on quarter, real GDP growth was estimated at 5.59 per cent.

The average daily oil production in Q4, however, declined to 2.00 million barrels per day (mbpd) during the review period, representing -0.04mbpd lower than the production volume of 2.04mbpd in Q3; but indicated a rise of 0.09mbpd over the 1.91 mbpd recorded in the same quarter of 2018.

However, oil production remained consistently at or above 2.0mbpd all through 2019, the NBS added.

The economy was largely driven by the non-oil sector, which contributed 92.68 per cent to growth in Q4 and 91.22 per cent at full year while the oil sector contributed 7.32 per cent to GDP and 8.78 per cent in 2019.

Agriculture contributed 26.09 per cent to growth while industries accounted for 20.27 per cent as well as services which recorded 53.64 per cent contribution to growth.

Furthermore, manufacturing contributed 8.74 per cent to real GDP in Q4 and 9.06 per cent at full year.

Analysts Urge FG to Tackle Insecurity, Enhance Non-oil Sector Activities

Reacting to the NBS data, analysts urged the federal government to address the structural imbalances constraining rapid GDP growth in the country.

The analysts also want the government to take advantage of the opportunities in the agro-processing/value addition and the bio-economy to create employment opportunities.

The Managing Director, Cowry Assets Management Limited, Mr. Johnson Chukwu, said the Q4 GDP figure was an improvement over the previous quarter.

He, however, noted that historically, the last quarter of every year always record higher economic activities, compared with other quarters.

In order to further propel economic growth, Chukwu, said: "So, you will realise that the 2.55 per cent we saw in the Q4 was largely driven by the oil and gas sector. And we all know that the impact of the oil and gas sector is minimal on the well- being of the citizens because it employs very few people. So, the key thing is to broaden the non-oil sector.

"We need to stimulate sectors like manufacturing, construction and the real estate sectors. These are sectors that would create employment and lead to inclusive growth in the economy."

Also, an economist and former Director General, Abuja Chamber of Commerce and Industry (ACCI), Dr. Chijioke Ekechukwu, said despite the performance, the economy may not be out of the woods.

He said insecurity remained a major bane in the country's development aspirations, adding that there might not be much economic growth if the issue is not addressed.

He said: "The country is not out of the woods with the GDP growth of 2.55 per cent in the 4th quarter of 2019. The reason for the growth was because of the seasonal business boom of Christmas and attendant gains.

"Since the beginning of 2020, virtually all other economic indicators are showing negative signs. Indicators like exchange rate, inflation, PMI, debt-to-GDP ratio, etc, are trending negatively. "Implications are that the economy is nose diving and needs some surgical economic re-engineering."

Also, speaking to THISDAY on the GDP outcome, renowned economist, Prof. Ken Ife, said though the positive performance represented a good and encouraging sign for the economy, "we really need to close the agro-processing/value addition/bio-economy gap to create youth employment and reduce the post-harvest losses currently at 30-70 per cent."

He expressed optimism that the incentives created in the 2020 Finance Act for MSMEs and agri-sector investors among others, would enhance and stimulate growth.

"Although industries in general performed less at 20.27per cent, manufacturing has shown consistently higher performance. But given that the uptick in inflation is propelled by a higher food basket sub-index of 14.85 per cent compared to urban sub index(12.78 per cent); rural sub index (11.54 per cent); core inflation (9.35 per cent ); and hence CPI of 12.13 per cent, we really need to close the agro-processing/value addition/bio-economy gap to create youth employment and reduce the post-harvest losses currently at 30-70 per cent," he added.

Also, West African Regional Representative of the African Association of Agricultural Economists (AAAE), Dr. Anthony Onoja, told THISDAY that the performance showed the economy was "certainly getting out of the woods."

But he said the maintenance of national security remained a key factor in boosting a stable economic growth while policies for agricultural development and economic growth must be updated in line with current macroeconomic realities.

He said the improvement of the GDP from 2018 to 2019 appeared to be dominated by a significant contribution of the non-oil sector to national growth with the growth in GDP of the period being accounted for by 92.68 per cent contribution from the sector against 7.32 per cent from the oil sector.

Onoja, who is also a Senior Lecturer of Agricultural Economics at the University of Port Harcourt, however, noted that this will require "creating a conducive environment for businesses to thrive in these sectors by providing national security, social infrastructure, especially stable and improved electricity power supply, while promoting policies for agricultural development, especially crop production where Nigeria has a comparative advantage."

A Senior Research Analyst at FXTM, Mr. Lukman Otunuga, said with the latest GDP figures, "there will be a strong focus on economic data ahead of the next CBN policy meeting in March. Investors will direct their attention towards the latest manufacturing PMI figures scheduled for release on Thursday, February 27. A figure that meets or exceeds the PMI market forecast of 58.4 may signal a recovery in the manufacturing sector - something that is supportive of growth potential."

The Head of Research, United Capital, Mr. Wale Olusi, stressed the need for policy reforms that would drive growth.

He said: "For us to go back to a growth that is faster, we need big reforms that would have a spiral effect on the overall economy. So long as we continue to tackle the little things that have not so significant impact on the economy, in 2020 we would continue to hover around two per cent GDP growth levels."

On his part, the Head of Research, Afrinvest West Africa, Mr. Abiodun Keripe, called for reforms in the power and oil and gas sectors.

He said: "We need to have stable power at market reflective prices. We still have issues with subsidies and some of these things need to be cut out. "Infrastructure needs to be improved on and these are things that can be done to help drive growth in the manufacturing sector.

"The non-oil sector needs to expand and a lot has to be done to drive that expansion. We must get our policy environment right; we must get our infrastructure framework right."

Also, an economist and Associate Professor at the Lagos Business School, Mr. Bongo Adi, said: "We need improvement in the infrastructure condition in the nation. Right now, we still have problems with energy, transportation. "The government needs to find funds to invest in infrastructure and expand the infrastructure network. The CBN policies are driving growth, but then the complimentary policies from the government needs to happen. "If we have these two together, surely growth would continue to happen."

FG Promises More Incentives to Strengthen Capital Market, Economy

Also yesterday, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, assured capital market operators that the federal government will introduce more tax incentives to boost investments in the capital market.

She also said her ministry would work on the Nigerian Stock Exchange (NSE) to put policies in place that would enhance the growth of the market and the nation's economy.

Speaking during a visit to the NSE, Ahmed said it was a privilege for her to be on the floor of the stock exchange, which drives activities in the capital that is regarded as the growth engine of any economy.

According to her, the government has in past worked closely with the NSE in various forms, noting that some tax provisions have been made in the Finance Act of 2020 to assist to deepen the market in areas of real estate investment schemes (REITS) and securities lending.

"We have asked the NSE to continue to work with us so that we can encourage Nigerians to invest more in the Nigerian capital market. We have a lot of resources locally and we are working with the NSE to ensure we mobilise resources through the market. Any policy that government needs to put in place to enable the growth of the market, we will do that," she said.

She explained that while the Finance Act of 2020 had taken care of some incentives, the next Finance Act will make provisions for more incentives to enable the market to be attractive to investors.

Responding to the capital market operators' request to defer the planned recapitalisation in the sector, the minister said it would make them stronger and compete better in the market.

According to her, with the demutualisation of the NSE coming through soon, stockbroking firms would have more businesses to do and therefore needed to recapitalise to operate better.

Also responding to comments by stockbrokers that many ministers had in past come to the NSE with many promises without fulfilling them, Ahmed assured them that her visit would be different because the federal government is committed to ensuring that the capital market is used to unlock the economic potential of the country.

In his welcome address, the Chief Executive Officer of NSE, Mr. Oscar Onyema, said they were delighted and honoured to host the minister and her delegation to the event, which they themed : 'A day at the NSE.'

"It is one in a series of the NSE's renewed government relations, where key government stakeholders interact with the capital market community on important issues that affect both parties in terms of Nigeria's economic management and policy reforms, ease of doing business environment, foreign and local investment attractiveness, capital market and ultimately economic growth and development," he said.

Onyema said that the government's fiscal and monetary reforms over the past two months had shown some intent at tackling the nation's challenges.

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