Analysts Warn Against Another Recession As Economic Growth Shrinks
The National Bureau of Statistics on Monday released Nigeria’s Gross Domestic Product growth rate report with the size of the economy shrinking from 2.11 per cent in the fourth quarter of 2017 to 1.95 per cent in the first quarter of this year.
The NBS stated in the report that in the first quarter of this year, the country recorded a nominal GDP of N28.46tn.
This, it added, was higher than the N26tn nominal GDP, which the economy recorded in the first quarter of 2017.
The report read in part, “Nigeria’s Gross Domestic Product grew by 1.95 per cent year-on-year in real terms in the first quarter of 2018. This shows a stronger growth when compared with the first quarter of 2017, which recorded a growth of -0.91 per cent, indicating an increase of 2.87 per cent points.
“Compared to the preceding quarter, there was a decline of -0.16 per cent points from 2.11 per cent. Quarter-on-quarter, the real GDP growth was -13.40 per cent.”
The NBS report stated that the real growth of the oil sector was 14.77 per cent year-on-year in the first quarter of 2018, while quarter-on-quarter, the sector grew by 13.24 per cent in the first three months of this year.
The report stated that the oil sector contributed 9.61 per cent to the total real GDP in the first quarter of 2018, up from 8.53 per cent and 7.35 per cent recorded in the first and fourth quarters of 2017, respectively.
The report added that the non-oil sector grew by 0.76 per cent in real terms during the first quarter.
This, it noted, was higher by 0.04 per cent compared to the rate recorded in the same quarter of 2017 and 0.70 per cent lower than the fourth quarter of last year.
The NBS said the non-oil sector was driven mainly by crop production, financial institutions and insurance, manufacturing, transportation and storage, and Information and Communication Technology.
“In real terms, the non-oil sector contributed 90.39 per cent to the nation’s GDP, lower than 91.47 per cent recorded in the first quarter of 2017 and 92.65 per cent recorded in the fourth quarter of 2017,” the report added.
Commenting on the decline in the growth rate, finance and economic experts said the 1.95 per cent GDP growth for the first quarter of 2018 had shown that while Nigeria was consolidating the exit from recession, the growth trajectory was still shaky.
A former Managing Director, Unity Bank Plc, Mr. Rislanudeen Mohammed, said the vulnerability of the economy to shocks was as a result of the endemic over-dependence on revenue from crude oil exports.
He stated, “Quarter-on-quarter, there was a reported decline of -0.16 per cent from 2.11 per cent in fourth quarter 2017.
“Indeed, this same concern was recently made by Fitch Ratings Agency, which affirmed Nigeria’s rating as B+ with negative outlook, implying stability in the economy but susceptible to vulnerability of external shocks due to continued overreliance on the sale of crude oil for revenue, low level of non-oil revenue generation as well as low GDP per capita.
“This is notwithstanding government’s efforts towards stabilising local currency through the Importers and Exporters’ Forex Window and the Economic Recovery and Growth Plan’s focus labs.”
He added, “While growth is showing positive though shaky trajectory, and inflation is coming down and reserves improving, there is a need to fast-track diversification efforts similar to what is happening in the agriculture sector.
“At this level of growth, it may be difficult for the Monetary Policy Committee to bring down rates as enthusiastically anticipated.”
Also speaking, a former Director-General, Abuja Chamber of Commerce and Industry, Dr. Chijioke Ekechukwu, said the recorded drop in the GDP growth rate of the country was a warning sign to policymakers.
“For the non-oil sector to record a decline of about 0.7 per cent compared to the last quarter of 2017 figure is an indication that we have again slowed down on the development of the non-oil sector.
“The 14.77 per cent oil sector growth is expected, considering the increased production capacity and oil price. The danger, therefore is, should any circumstance threaten oil production and price, Nigeria may go back to recession.
“This threat is worsened by our country’s imminent general elections. We need to concentrate on growing the non-oil sector in agriculture, manufacturing and financial services, and set measurable targets and thresholds with timelines. This we need to do to forestall further decline.”
Some other experts described the quarter-on-quarter decline in the GDP growth rate as a cause for concern.
The Chief Executive Officer, Financial Derivatives Company Limited, Bismarck Rewane, noted that the GDP figure for the fourth quarter of 2017 was revised upwards to 2.11 per cent from the 1.92 per cent initially announced by the NBS.
He stated, “The 1.95 per cent figure for the first quarter of this year is at best mild and nothing to be excited about; in fact, it is a cause for concern because we have maintained exchange rate stability and price stability; that is why we are beginning to see anaemic growth.”