Nigeria: Experts Divided Over Nigeria's Recovery From Recession

Lagos, Nigeria.
19 February 2021

The announcememt by the National Bureau of Statistics (NBS) that the nation's economy recovered from recession in the last quarter of 2020 has got economic experts divided over the possibility or otherwise of the recovery.

While some agreed the early exit from recession was expected, others cast aspersion on the figures, saying the reality on ground does not suggest that the economy was in anyway better than when it slided into recession. The nation's economy slipped into a recession in November after its gross domestic product contracted for the second consecutive quarter.

But figures released yesterday by the NBS showed that Nigeria's 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.

In the quarter under review, aggregate GDP stood at N43,564,006.29 trillion in nominal terms. This performance is higher when compared to the fourth quarter of 2019 which recorded a GDP aggregate of N39,577,340.04 trillion, representing a year on year nominal growth rate of 10.07 per cent.

While the Q4 2020 growth rate was lower than growth rate recorded the previous year by -2.44 per cent points, it was higher by 3.74 per cent points compared to Q3 2020. On a quarter on quarter basis, real GDP growth was 9.68 per cent indicating a second positive consecutive quarter on quarter real growth rate in 2020 after two negative quarters.

Overall, in 2020, the annual growth of real GDP was estimated at -1.92 per cent, a decline of -4.20 per cent points when compared to the 2.27 per cent recorded in 2019.

Recating to the development, former chairman, Nigerian summit group, Buka Kyari said although the GDP figures might be right, the official growth rate recorded in Q4 does not translate to economic wellbeing of most Nigerians, whose per capital income has drop in the last quarters. He said there is need for monetary and fiscal authorities to synergise for better ways to drive an inclusive economic growth in Nigeria. "The monetary and fiscal authorities need to handshake to see ways to accelerate economic growth," Kyari stated.

While it came as a surprise to some, others were expecting such report, even as they said the growth is sluggish.

An economist and former director general of the West African Institute for Financial and Economic Management (WAIFEM), Professor Akpan Ekpo, said the growth recorded was rather too sluggish.

Expo, who is also the chairman of the Foundation for Economic Research and Training, said: "It is a very sluggish Q4 recovery but it shows signs that perhaps the reforms put in place have started having effect. For the year, the economy grew at -1.98 per cent so we are still in recession and so we are getting out of it slowly but it is very negligible."

For Professor Ekpo, the growth recorded still reflects an economy in a bad shape as he said "when you look at the figures again, the oil sector contracted so it is not doing well and the non-oil sector is also not doing well. So, we just barely escaped the contraction in the Q4 because of increased government spending on the economy.

"If you combine that with the rising inflation rate especially food inflation, then the economy is not really doing well, it is in bad shape. With the inflation rate of close to 17 per cent, food inflation of over 20 per cent. We should not be celebrating any sluggish recovery.

"Combining the inflation rate and food inflation as well as rising unemployment then the economy is in bad shape because it shows that the misery index is still rising and there is no cause for celebration."

To ensure that the country sees the kind of growth it expects in the post COVID-19 era, he said: "All these hike in petrol prices, hike in tariff have to wait and since the oil price is going up, it means government is getting more revenue so they should use that revenue.

"Government still needs to spend itself out of recession. On the fiscal side there should be more expenditures on capital project. Government should put money in people's hand. Social investment programmes should be implemented and then investment policies structural policies should be implemented.

"They should encourage private sector to show interest in the economy. And hopefully this new surge in the pandemic would not force government to do another lockdown became if that takes place then we may see a reversal. I hope people follow protocol so that there won't be another lockdown that will affect the economy negatively."

On his part, the head of research at United Capital, Wale Olusi, said the improvement in GDP figures did not come as a surprise as he said "we expected that Q4 number will be an improvement from the -3 per cent we had in Q3 and then we also expected that the full year number will be negative GDP growth year on year.

"It broadly mirrors the reopening of the economy that we saw in Q4 of last year as well as increase in economic activities in the quarter which ultimately moderated the impact of the lockdown that we saw in April, May and June. Hence the rather moderate negative growth for the year as a whole. Also in December there was festive activities which supported economic activities and the recovery itself."

Analysts at Cowry Asset Management Limited said in the last quarter of 2020, Nigeria exited its recession having printed a year-on-year (y-o-y) real output growth rate of 0.11 per cent to N19.55 trillion (or $122.44 billion) as lock down measures were significantly eased, allowing households and business to resume economic activities; and in spite of the anti-SARS protests in several parts of the country.

According to Cowry, this is in addition to the several billions of naira in economic stimulus packages provided by the monetary and fiscal authorities to help households and businesses cope with the ravaging effect of COVID-19.

It noted that sector-wise, the exit was propelled essentially by a 1.69 per cent growth in non-oil sector; with the Information & Communication, Agricultural and Real Estate sectors registering the biggest growth rates of 14.95 per cent, 3.42 per cent and 2.81 per cent respectively.

Those who expressed disbelieve over the GDP figures point to certain economic indicators which they say betray the official figures released by the statistics office.

Nigeria's core inflation rate rose to 16.47 per cent while food inflation stood at 20.59 per cent in Jnauray, 2021. Those who question the authenticity of te figures say the high umeployment rate at approximately 7.96 per cent in 2020.

Also, total value of capital importation into Nigeria stood at $1,069.68m in the fourth quarter of 2020. This represents a decrease of -26.81 per cent compared to Q3 2020 and -71.87 per cent decrease compared to the fourth quarter of 2019, according to NBS figures. "Essentially, the feeling of everyone is as if we are still in recession," Kyari said.

It stated that, "in line with our expectation, Nigeria's economy remains well on track to see a convincing recovery amid return to economic activities, the administration of the COVID-19 vaccine, strong crude oil prices and the numerous stimulus packages. We nevertheless expect the Nigerian authorities to take necessary measures to strengthen the fragile recovery."

Meanwhile, director-general of Lagos Chamber of Commerce & Industry (LCCI), Dr Muda Yusuf, said the quarterly performance was a pleasant surprise, saying, the economy ended year 2020 in a negative growth region, with annual GDP growth declining by 1.92 percent, its lowest level since 1994.

According to Yusuf, in our 2021 economic outlook report, we posited that annual real GDP growth rate would range between -two percent and -one percent.

On 2021 Growth Outlook, the DG of LCCI said: "the current downturn is expected to be short-lived going forward. There are indications that recovery might be faster than expected however the pace of recovery is expected to be subdued within the region of one and two percent.

"Projections by World Bank and IMF put Nigeria's annual average growth for year 2021 at 1.1 percent and 1.5 percent, respectively."

He explained that, "the country's recovery prospects in year 2021 will be dependent on five key factors including; effective management of the pandemic locally and globally; widespread vaccine rollout; direction of global oil market; fiscal and monetary policy direction; and ease of doing business reforms."

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