Nigeria’s Gross Domestic Product (GDP) has expanded at a real rate of 5.01 per cent in the second quarter of 2021 from the 0.51 per cent recorded in the first quarter of the year.
The GDP report released Thursday by the National Bureau of Statistics (NBS) shows the latest economic growth rate is the highest in the past seven years since the last quarter of 2014.
The GDP report captured the total monetary or market value of all the finished goods and services produced within Nigeria in the first quarter of this year to show overall growth in the economy.
Analysis of the report showed that the positive growth recorded in the second quarter of 2021 marks three consecutive quarters of growth following the negative growth rates recorded in the second and third quarters of 2020.
“The steady recovery observed since the end of 2020, with the gradual return of commercial activity as well as local and international travel accounted for the significant increase in growth performance relative to the second quarter of 2020 when nationwide restrictions took effect,” NBS stated.
NBS said further that the latest economic expansion is an indication of “The return of business and economic activity near levels seen prior to the nationwide implementation of COVID-19 related restrictions.”
Recall that Nigeria’s economy recorded downturns in 2016 and the third quarter of 2020 when the economy went into recession.
In the quarter under review, aggregate GDP stood at N39.12trillion in nominal terms, higher than the second quarter of 2020 with aggregate GDP of N34.02 trillion, indicating a year on year nominal growth rate of 14.99 per cent.
Analysis showed that the nominal GDP growth rate in the second quarter of 2021 was higher than -2.80 per cent growth recorded in the second quarter of 2020 when economic activities slowed sharply at the outset of the pandemic.
Non-oil sector contributes 92.58% to economy
In real terms, the non-oil sector contributed 92.58 per cent to the nation’s GDP in the second quarter of 2021, higher from shares recorded in the second quarter of 2020, which was 91.07 per cent and the first quarter of 2021 recorded as 90.75 per cent.
The report showed that the non-oil sector grew by 6.74 per cent in real terms during the period.
“During the quarter, the sector was driven mainly by growth in Trade, Information and Communication (Telecommunication), Transportation (Road Transport), Electricity, Agriculture (Crop Production) and Manufacturing (Food, Beverage & Tobacco), reflecting the easing of movement, business and economic activity across the country relative to the same period a year earlier,” the report stated.
ICT sector contributes 17.92%
The contribution of Information and Communications Technology (ICT) sector to the GDP in the second quarter of 2021 rose to 17.92 per cent, being 20.54 per cent higher than its contribution a year earlier and in the preceding quarter, in which it accounted for 14.91 per cent.
Reacting, the Minister of Communications and Digital Economy, Dr Isa Ali Ibrahim Pantami, said: “This is the highest contribution of ICT to the GDP and is truly unprecedented.”
Pantami said that the growing contribution of the ICT sector to the GDP is as a result of the commitment of the administration of President Muhammadu Buhari to the development of the digital economy.
The minister said: “The 16 national policies developed by the ministry, the 1,667 projects and programmes, the large scale digital skills and general capacity-building efforts, stakeholder engagement and creation of an enabling environment have all played an important role in this achievement.”
Oil sector contributes 7.42% to economy
In the second quarter of 2021, the oil sector contributed 7.42 per cent to total real GDP in the second quarter of 2021, down from figures recorded in the corresponding period of 2020 and down compared to the preceding quarter, where it contributed 8.93 per cent and 9.25 per cent respectively.
Average daily oil production stood at 1.61 million barrels per day (mbpd), which is -0.19 mbpd lower than the average daily production of 1.81mbpd recorded in the same quarter of 2020 and -0.10mbpd lower than the 1.72mbpd recorded in the first quarter of 2021.
Real growth of the oil sector was -12.65 per cent (year-on-year) in Q2 2021 indicating a decrease of -6.02 per cent points relative to the growth rate recorded in the corresponding quarter of 2020.
Abuja, Lagos chambers commend FG, caution against complacency
The President of the Abuja Chamber of Commerce and Industry (ACCI), Dr Al-Mujtaba Abubakar congratulated the government on the latest economic growth and tasked the government to expand the GDP further.
Abubakar said the GDP growth can even expand further in the third and last quarters if the government can enforce the implementation of many incentives already announced for the Micro, Small and Medium Enterprises (MSMEs) in Nigeria.
He said easing tax and other regulatory ropes on businesses will catapult the non-oil sector growth beyond 6.7 per cent recorded in the second quarter 2021.
“We are elated that Nigeria is largely returning to the pre-pandemic level and we have high hope that this new level will be sustained through improved efforts to address inflation, multiple taxations and a generally difficult business environment,” he said.
The Director General of Lagos Chamber of Commerce and Industry (LCCI), Dr Chinyere Almona, said the loss of jobs due to the negative effects of the COVID-19 pandemic may have driven more people into the retail trade, commerce and logistics, leading to the positive growth in the transport subsectors as recorded in the latest GDP report.
She said the growth is evidence that the Nigerian economy is recovering fast and sustained by the reduction in supply chain disruptions especially as there was no serious lockdown on economic activities in the second quarter,” she said.
“We must watch and respond appropriately to the major threats to this growth performance like the third wave of COVID-19 infections that could lead to restrictions of movement, the rising spate of insurgency, banditry, kidnapping and the persistent farmer/herder conflicts,” she said.
Experts task monetary, fiscal authorities to remain cautious
Economists and captains of industry have tasked the monetary and fiscal authorities not to be carried away by the latest growth as the economy remains fragile and can still slip back into recession.
The Chairman Fidelity Bank and President of Bank Directors Association of Nigeria (BDAN), Mr. Mustapha Chike-Obi applauded federal government’s policies and incentives that aided Nigeria’s 5.01 per cent GDP growth.
Speaking on the development, Chike-Obi said, “Government policies have helped and the incentives given by the government have helped. Situate this with the fact that inflation has moderated at the same time. It is still quite high but it has not been rising in the last report.”
He urged the government on the need to sustain the growth trajectory of the economy and continue with the expansionary policies.
“It is unlikely that we would sustain a 5 per cent growth without significant expansionary policies. It is unlikely growth without expansionary policies. So, I think that there’s work to be done on the expansionary side of the economy,” he said.
Similarly, the Managing Director of Kairos Capital, Mr. Sam Chidoka said the economy needs to be outstripping population growth at the minimum of about 4 to 5 per cent continuously for the foreseeable future.
He said: “Government has to be deliberate in policies that expand the economy and reduce inflation. We have two things working for us now; inflation figures have been strengthening downwards in the last few months and now GDP growth is actually trending upwards so that is good news.”
Also speaking on the result, the Chief Economist at Coronation Research, Chinwe Egwim, attributed the latest economic upturn to the gradual resumption of economic/business activity following the ease in restrictions as at end-2020.
“We suspect that the release of pent-up demand, particularly for consumers within the middle-income bracket may have supported increased trade activities. We also note that supply chain disruptions which peaked in Q2 2020 have eased slightly,” he said.
An economist and former Director General of ACCI, Chijioke Okechukwu said the current growth in the economy “does not mean we are out of the woods.”
“To have a Year on Year growth of 5.1 per cent shouldn’t be seen as all uhuru. We need to be looking at the lost opportunities in all sectors during and after COVID-19. Opportunities in DFIs, DPIs, in manufacturing, in agriculture, in employment, etc, and strive to have an economic catch-up. Only after then, we can say we are out of the woods,” he said.
Insecurity would have been taken for granted and non-existent in such circumstances. For now, it is heart-warming, nonetheless, that we are recovering at this rate.
To sustain growth, government needs to continue creating more and a better investment climate for the private sector.
An economist, Dr Muda Yusuf, stressed the need to fix issues around regulatory environment, tax environment and the multitude of levies imposed on businesses by all levels of government; foreign exchange policies, ports environment and other structural bottlenecks to productivity in the economy.
He also made known that there are still worries about the macro-economic challenges reflecting in spiralling inflation, weakening of the currency, forex market illiquidity and spiking debt profile among others.
He said the major drivers of the growth numbers are not significant contributors to the GDP, except the trade sector.
He said that “The road transportation grew by 92 per cent; rail grew by 53 per cent; electricity, gas and steam and air conditioning by 78 per cent; coal mining, 34 per cent; trade, 22 per cent; water and waste management, 18 per cent; insurance, 15.7 per cent while other financial institutions strangely contracted by 4.5 per cent. Telecommunications also grew by 6percent; music and motion pictures, 5 per cent; health and social services 5 per cent and manufacturing, 3.5 per cent.”
The biggest contractions he pointed out were from oil refining with 47 per cent; crude oil and gas, 13 per cent. This he said reflects the enormity of the challenges faced by investors in the sector.
“It is good to celebrate the GDP growth numbers, but this should be done cautiously because the impact of the GDP growth on citizens’ welfare and the productivity in the investment environment are crucial. These are the metrics that matter most, ultimately. The GDP figures are not ends in themselves, they are means to an end,” he said.
Buhari commends managers of economy
President Muhammadu Buhari has commended managers of the economy for hard work and commitment, which expanded the economy, urging them to keep at it till the positive development “touches the lives and pockets of the average Nigerian.”
A statement issued Thursday by President Buhari’s spokesman, Femi Adesina welcomed the second quarter of the 2021 GDP report.
The President said the various policies of the administration, aimed at boosting agricultural production, improving the business environment and investing in infrastructure were beginning to yield fruit with the complementary news of the steady decline in the rate of inflation, over the last few months.
He added that the positive effects of the Economic Sustainability Plan (ESP), which helped fast-track the country’s exit from the COVID-induced recession of 2020, continued to be evident, as some of the sectors driving the Q2 2021 growth had benefited or were benefiting from government-led interventions.
President Buhari, while looking to the future, assured Nigerians that there was much to be optimistic about.
He also assured that the investments in agriculture and infrastructure would continue as the ongoing efforts to achieve a significant improvement in the security situation across the country.