Economists excited about Improved Growth of Nigeria's Economy

Sat, Mar 3, 2018 | By publisher


Business, Featured

The improvement in the growth of Nigeria’s economy as announced by the National Bureau of Statistics elicits commendation from economists

By Anayo Ezugwu

ECONOMISTS have continued to applaud the 2017 Gross Domestic Product, GDP, report released by the National Bureau of Statistics, NBS. The GDP report showed that the nation’s economy grew by 0.82 percent in 2017. The 0.82 percent growth in GDP is an improvement over the contraction of -1.58 percent which the economy recorded in 2016 during the period of recession.

Bismarck Rewane, chief executive, Financial Derivatives Company Limited, said although the 0.83 percent growth recorded in 2017 wasn’t impressive, it was a movement in the right direction. He stressed the need for the Central Bank of Nigeria, CBN, to reduce the cash reserve requirement, CRR, for banks as well as refund some of the CRR to the lenders. This, he anticipated, would spur lending.

“So, we need to now begin to invest, bring down the interest rate and credit to the private sector needs to grow. We have to reduce CRR and we have to accept that inflation will increase marginally. So, in all, 0.83 per cent is actually not good enough, but it is positive. We need to do some things differently from what we have been doing them in the past,” he said.

Rewane explained that the CBN doesn’t have to hold a monetary policy committee, MPC, meeting before it can implement some of his suggestions. “You can bring down the nominal rate without bringing down the policy rate. You can bring the treasury rates down and you can refund some CRR to the banks and then encourage the banks to lend more to the private sector.”

Similarly, Adeyemi Dipeolu, special adviser to the president on economic matters, said the expectations of the administration that the Nigerian economy will grow this year by 3.5 percent were on course. Dipeolu said in a statement that the optimism was anchored on the latest GDP figures announced by the statistical agency.

“The figures recently released by the Nigerian Bureau of Statistics (NBS) for the fourth quarter of 2017 (Q4 2017) and the full year 2017 (FY 2017) showed a consolidation of post-recession growth in the national economy.

“The growth of 1.92 percent in fourth quarter of 2017 was an improvement on both the previous quarter and the previous year. This quarterly growth contributed to an overall positive growth rate of 0.82 percent in 2017 which translates to a 2.24 percentage points increase from -1.58 percent in 2016.’

There are two encouraging aspects of the figures. The first is that all major sectors of the economy, namely, agriculture, industry and services are now experiencing positive growth.

Agriculture, which accounted for 25 per cent of GDP in 2017, grew by 4.23 per cent in Q4 2017, while industry grew by 3.92 per cent. The services sector, which is about 53 per cent of GDP, returned to positive growth in Q4 2017. Although the increase was marginal at 0.10, it represented a positive swing of 2.76 percentage points from the level in Q3 2017.

The other notable element of the data was that the non-oil sector experienced a strong growth of 1.45 per cent in Q4 2017 compared to a contraction in the previous quarter and the whole of 2016. This showing, the strongest since 2015, points to steady improvements across the economy.

Also noteworthy in this regard were strong quarterly growth in crop production, crude oil production, metal ores, construction, transportation, trade, electricity and gas production. The positive trajectory for the economy should begin to gain momentum as the multiplier effects of investments in infrastructure, including power, roads, and rail, alongside improvements in the business environment begin to manifest.

The agricultural sector is expected to continue its strong showing, while manufacturing should also show sustained growth based on improved availability of foreign exchange and greater backward integration in several of its sub-sectors. Taking all these factors into consideration, the federal government estimate of a 3.5 percent growth in 2018 is quite achievable.

According to the report, the non-oil sector grew in real terms by 1.92 percent in the fourth quarter of 2017 (year-on-year), maintaining its positive growth trajectory since the emergence of the economy from recession in the second quarter of 2017.

The fourth quarter figures showed that Nigeria’s non-oil sector continued to reverse the contraction recorded in previous quarters, with a 1.45 percent growth in the fourth quarter of 2017, the first since the economy slipped into recession in the second quarter of 2016.

The 1.92 percent growth in the fourth quarter of 2017 contrasted with the contraction of –1.73 percent recorded in fourth quarter of 2016 and a growth of 1.40 percent recorded in third quarter of 2017. Quarter-on-quarter, real GDP growth was 4.29 percent. The NBS also stated that the 2017 real annual growth rate of 0.83 percent was higher by 2.42 percent than –1.58 per cent recorded in 2016.

In the quarter under review, aggregate GDP stood at N31.209 trillion in nominal terms higher when compared to N29.169 trillion in Q4 2016, resulting in a nominal GDP growth of 6.99 percent. This growth was lower relative to the growth recorded in fourth quarter of 2016 at 12.49 percent. Nominally, 2017 recorded an annual growth rate of 12.05 percent, higher by 4.25 percent compared to 2016 annual growth of 7.80 percent.

According to the NBS, GDP growth in the fourth quarter of 2017 was driven by growth in crop production, crude production and natural gas, metal ores, construction, transportation and storage, trade, electricity and gas production.

Crop production grew by 4.58 percent in the fourth quarter of 2017 compared to 3.19 percent in the third quarter 2017. However, crude oil production grew by 8.38 percent in the fourth quarter of 2017 compared to 25.89 percent in the third quarter of 2017.

Similarly, metal ore grew by 31.86 percent in the fourth quarter of 2017 compared to 10.70 percent in the third quarter and 7.03 percent in fourth quarter of 2016. Construction grew by 4.14 percent in fourth quarter of 2017 compared to a contraction of -0.46 percent in third quarter of 2017 and another contraction of -6.03 percent in fourth quarter of 2016, representing the strongest growth in construction since second quarter of 2015.

Transportation and storage grew by 16.57 percent in fourth quarter of 2017, compared to -6.25 percent in third quarter 2017 and -5.32 percent in fourth quarter of 2016. Similarly, trade, after six quarters of negative growth, grew by 2.07 percent in fourth quarter 2017, while electricity and gas production grew 16.03 percent in fourth quarter 2017, compared to 11.46 percent in third quarter of 2017 and a contraction of -5.16 percent in fourth quarter of 2016.

According to the NBS, the non-oil sector recorded an annual growth of 0.47 percent compared to -0.22 in 2016, adding that the fourth quarter growth was 1.78 points higher than the rate recorded in the same quarter of 2016 but 2.21 percent point higher than in the third quarter of 2017.

Oil production averaged at 1.91 million barrels per day (mbpd), indicating a -0.12 million barrels decrease over the daily average production recorded in the third quarter of 2017.

Similarly, the NBS noted that oil production during the fourth quarter of 2017 was higher by 0.15 million barrels per day relative to the corresponding quarter in 2016, which recorded an output of 1.76mbpd.

But real growth in the oil sector was 8.38 percent (year-on-year) in fourth quarter of 2017, a 26.08 per cent decline compared to the rate recorded in the corresponding quarter of 2016. The statistical agency’s figures showed that growth declined by -17.50 percent when compared to third quarter 2017 which was 25.89 percent quarter-on-quarter, the oil sector dropped by -25.52 percent in fourth quarter of 2017.

The annual growth of the oil sector stood at 4.79 percent higher than the previous year’s growth of -14.45 percent. However, the oil sector contributed 7.17 percent of total real GDP in fourth quarter 2017, an increase over what was posted in the corresponding period of 2016, but down from the preceding quarter, when it contributed 10.04 percent to total GDP. The sector’s annual contribution was put at 8.68 per cent in 2017 and 8.35 per cent in 2016.

With this, Nigeria’s economic growth last year corresponded with the forecast of Maurice Obstfeld, chief economist, International Monetary Fund, IMF, who had predicted last October that Nigeria’s economy would grow by 0.8 percent in 2017.

“Nigeria is expected to emerge from the 2016 recession caused by low oil prices and the disruption of oil production. Growth in 2017 is projected at 0.8 per cent owing to recovering oil production and ongoing strength in the agricultural sector,” Obstfeld had said.

– Mar. 3, 2018 @ 4:10 GMT |

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