The National Bureau of Statistics NBS, has said 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.
The latest release by the NBS, signed by Dr. Yemi Kale, noted: “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”.
Kale said that “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%, a decline of –4.20% points when compared to the 2.27% recorded in 2019. In the quarter under review, aggregate GDP stood at N43,564,006.29 million 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 million, representing a year on year nominal growth rate of 10.07%. This growth rate was lower relative to growth recorded in the fourth quarter of 2019 by –2.26% points but higher than the preceding quarter by 6.68% points with growth rates recorded at 12.34% and 3.39% respectively. For better clarity, the Nigerian economy has been classified broadly into the oil and non-oil sectors.
But assessment the performance of the economy in the fourth quarter, the Lagos Chamber of Commerce and Industry (LCCI), expressed pleasant surprise at the development.
It said, the LCCI “believes output contraction recorded in year 2020 further highlights the country’s weak macroeconomic fundamentals and the persistent, structural, policy and regulatory issues in the economy. Apart from declining growth, the economy is currently confronted with several challenges, including rising consumer prices (inflation now at 45-month high of 16.47% in January 2021), weak employment level, persisting liquidity concerns in the foreign exchange market, high poverty incidence, weak investor confidence and insecurity, among others. These challenges which had been part of the country’s economic narrative prior to the pandemic, were amplified by the covid-19 induced disruptions.
“The persistent decline in real capita growth since 2015 indicates the fact that the economy has not grown fast enough to create opportunities for the rapidly growing Nigerian populace. This translates to more hardship for the Nigerian citizenry who are currently grappling with weaker real disposable income amid rising inflation. Per capita income growth is expected to maintain its downward trajectory till the medium term, as the economy is expected to recover gradually from the 2020 contraction. Businesses, particularly those in the production sector, still encounter challenge in accessing foreign exchange due to the lingering liquidity concerns in the currency market. We note the Central Bank’s accommodative policy disposition in year 2020, evidenced by its sustained developmental finance efforts and deliberate interest rate reduction. On the other hand, we also acknowledge the efforts by fiscal authorities in quickening recovery via the Economic Sustainability Plan. However, the stimulus provided by fiscal and monetary authorities (c.3% of GDP) was largely insufficient to achieve desired outcomes even as policy responses failed to address the structural challenges stifling productivity across sectors.
“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. The country’s recovery prospects in year 2021 will be dependent on five key factors including (a) effective management of the pandemic locally and globally; (b) widespread vaccine rollout; (c) direction of global oil market; (d) fiscal and monetary policy direction (e) ease of doing business reforms. Accelerating the pace of economic recovery requires fiscal and monetary authorities to be well coordinated to promote growth-enhancing and confidence-building policies that would encourage more private capital inflows into the economy. Investment-led growth strategy is critical for inclusive and sustainable economic growth. Strong commitment to key reforms will not only boost output recovery but will also put the nation on a path of macroeconomic stability.
“We accordingly recommend as follows: review of the foreign exchange management framework to expand the scope of market mechanism in the determination of the exchange rate. The unification of the exchange rates should be prioritised. This is imperative for expediting recovery and bolstering investor confidence. Clarity in government’s policy direction is critical in deepening investor confidence; mobilising efforts in making the business environment more conducive for MSMEs and large corporates by addressing structural bottlenecks and regulatory constraints contributing to high cost of doing business; prioritising public spending to support critical capital development expenditures in road, railways, power, health, education, etc; intensify diversification efforts through efficient utilisation of excess crude oil proceeds to develop the non-oil sector; privatise idle public assets to help the economy unlock liquidity needed for strong economic growth and improved revenue mobilisation; deepening deregulation efforts in the downstream oil industry by (a.) providing industry players with FX at competitive rate to import petrol; (b.) ensuring sustainable PMS pricing model; (c) expeditious passage of the Petroleum Industry Bill to ensure efficient transparency in the utilisation of petroleum resources; promote healthy competition and drive private investment in the oil & gas sector. Proper harmonisation of fiscal and monetary policies is necessary in the course of stimulating domestic output and stabilising prices. It is imperative for both sides of authorities to develop a medium-term recovery plan that anchors on boosting local productivity, supporting ease of doing business, attracting private capital flows, developing physical and soft infrastructure, business-friendly regulatory policies, economic diversification, and employment generation, among others”.