Nigeria’s economy grows by 0.51% in Q1 amid 1.72 mbpd oil production
LCCI raises concern over hospitality, entertainment sectors
…Analysts express shock over non-oil sector weak contribution
By Uthman Salami & Kayode Tokede
The National Bureau of Statistics (NBS) on Sunday disclosed that amid slow pace of economic activities in the first quarter of the year (Q1, 2021), Gross Domestic Product (GDP) increased by 0.51 per cent year-on-year.
The NBS in the Nigerian GDP Report for Q1 2021, said this marked two consecutive quarters of growth, following negative growth rates recorded in the second and third quarters of 2020.
It said the Q1 2021 growth rate was slower than the 1.87 per cent growth rate recorded in Q1 2020 but higher than 0.11 per cent recorded in Q4 2020, indicative of a slow but continuous recovery.
Nigeria’s GDP recovered from recession in Q4 2020 by 0.11 per cent, from the 6.11 per cent contraction it recorded in Q3 2020.
The report by NBS said, “Nevertheless, quarter on quarter, real GDP grew at -13.93 per cent in Q1 2021 compared to Q4 2020, reflecting a generally slower pace of economic activities at the start of the year.”
The NBS said that in the quarter under review, aggregate GDP stood at N40.01 trillion in nominal terms.
It added that this performance was higher when compared to the first quarter of 2020 which recorded aggregate GDP of N35.64 trillion, indicating a year on year nominal growth rate of 12.25 per cent.
Also, the nominal GDP growth rate in Q1 2021 was higher, relative to 12.01 per cent growth recorded in the first quarter of 2020 as well as the 10.07 per cent growth recorded in the preceding quarter.
The NBS classified the Nigerian economy into oil and non-oil sectors.
For the oil sector, in Q1, average daily oil production stood at 1.72 million barrels per day (mbpd).
This was lower than the average daily production of 2.07mbpd recorded in the same quarter of 2020 by 0.35mbpd but higher than the production volume of 1.56mbpd recorded in Q4 2020.
It added that the real growth of the oil sector was –2.21 per cent (year-on-year) in Q1, indicating a decrease of –7.27 per cent relative to the growth rate recorded in the corresponding quarter of 2020.
“Compared to Q4 2020 which recorded –19.76 per cent growth rate, growth in Q1 was higher by 17.55 per cent.
“Quarter-on-quarter, the oil sector recorded a growth rate of 35.65 per cent in Q1.
“In terms of contribution to aggregate GDP, the oil sector accounted for 9.25 per cent of aggregate real GDP in Q1, slightly lower than 9.5 per cent recorded in the corresponding period of 2020 but higher than in the preceding quarter, where it contributed 5.87 per cent.”
The NBS said the non-oil sector grew by 0.79 per cent in real terms in Q1, which was –0.75 per cent lower compared to the rate recorded in the same quarter of 2020 and -0.89 per cent lower than rates recorded in Q4 2020.
However, growth in the non-oil sector was driven mainly by the Information and Communication (Telecommunication) sector.
Other drivers were agriculture (crop production), manufacturing (food, beverage and tobacco), real estate, construction, human health and social services.
It said that in real terms, the non-oil sector accounted for 90.75 per cent of aggregate GDP in Q1, higher than its share in Q1 2020 which was 90.50 per cent but lower than 94.13 per cent recorded in Q4 2020.
The bureau explained that Quarterly National Accounts (QNA) were an integrated system of macroeconomic accounts designed to describe the entire system of production in a nation on a quarterly basis.
They provided a picture of the current economic status of an economy on a more frequent basis than Annual National Accounts (ANA).
In providing a reasonable level of detailed information of the economy, QNA allowed the government to regularly access, analyse and monitor economic developments.
LCCI raises concern over hospitality, entertainment sectors
However, the Director General of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf raised concerns over hospitality and entertainment sectors, stressing that both are in recession.
He also said, the trade sector with a negative growth of 2.43 per cent is facing numerous challenges from exchange rate depreciation and illiquidity, among others.
In his words, “The hospitality and entertainment sectors are still in recession. This is a sector with high employment elasticity with numerous small and micro enterprises. The two sectors have been in recession for over a year. The government needs to do a lot more to salvage the sector from complete collapse.
“The accommodation and food services sector contracted by 4.6per cent in Q1 2021 while the entertainment and recreation sector contracted by 1.13per cent.
“We note with concern the continued contraction of the trade sector which recorded a negative growth of 2.43per cent. The sector has been grappling with headwinds arising from exchange rate depreciation and illiquidity, high inflationary pressures, and weak purchasing power. Yet the sector is one of the biggest sources of employment, especially in the self employment space.
“It is equally worrisome that the transportation sector experienced the worst contraction at 21.9% in the first quarter of 2021. This may be as a result of the growing insecurity on our roads. This goes to demonstrate the multidimensional impact of insecurity on the economy.”
He noted the marginal improvement in real GDP growth from 0.11per cent in Q4 2020 to 0.51per cent in Q1 2021, highlights that the nation’s economy is still struggling to recover from the shocks of the pandemic and related slip into recession.
He added that, “The GDP data contained a few pleasant surprises. The agricultural sector expanded by 2.28% despite the ravaging effects of insecurity, farmers herders clashes and the displacement of many farming communities.
“The recovery of manufacturing from a negative growth territory in Q4 2020 to a positive growth level of 3.4% in Q1 2021 was also a pleasant surprise. The sector has been grappling with an unprecedented foreign exchange illiquidity over the past few months. This is coupled with the structural, policy, institutional and macroeconomic challenges. The data does not reflect the reality with most manufacturers.
“Most foreign exchange dependent manufacturing sectors have not had a good experience in the past one year. Admittedly, segments of manufacturing with high levels of backward integration had lesser degree of shocks from the forex illiquidity in the economy.
“The growth of 6.31% recorded in the ICT sector is expected given the opportunities created for ICT in the new normal.
“The cost reflective tariff appears to have impacted positively on the electricity sector which recorded 8.66%. This was the highest sectoral growth performance in the GDP report. But a lot of issues remain to be resolved in the electricity sector.”
Analysts express shock over non-oil sector weak contribution in Q1
Responding also, an economist and President, Association of Capital Markets Academics of Nigeria (ACMAN), Prof. Uche Uwaleke also raised concerns over non oil sector decline performance in the period under review.
According to him, the drop in non-oil should be of concern to both the fiscal and monetary authorities.
“But the report also reveals disturbing pattern in the real GDP growth rate. Declines were recorded in critical sectors of the economy such as Agriculture, ICT, Real Estate and Transportation. This may not be unconnected with the rising insecurity in the country.”
He stated further in a statement that, “The Q1 2021 GDP report reflects an economy already on the path of gradual economic recovery with a positive real GDP growth rate following that recorded in the previous quarter.
Although still weak at 0.51per cent, it is interesting to note that the manufacturing sector is now out of the negative territory increasing from -1.51per cent to 3.40per cent.
“Equally noteworthy is the moderation in the negative performance in sectors like Trade, Accommodation and Education.
“The increase recorded in the Health sector from 3.05per cent in Q4 of 2020 to 4.65per cent clearly shows that the country is winning the war against the COVID’19 pandemic.
“It is clear that the improved performance in the oil sector relative to the previous quarter was largely on account of improvement in average crude oil production.”
Speaking with our correspondent in a telephone chat, the former President of Chartered Institute of Bankers of Nigeria (CIBN) and a lecturer of economics at Babcock University, Professor Segun Ajibola expressed that the nation’s economy has not fully recovered
According to him, “If you compare Q1 2020 real GDP growth with Q1 2021, were had distortions caused by the COVID-19 pandemic.
“It has turned positive from 0.11 per cent reported in Q4 2020 to 0.51 per cent in Q1 2021 which means the economy is recovering gradually.
“If we can maintain this trend, I can say that, towards the end of the year, we will be able to hit the target of three per cent GDP growth, a target by FG this year.
“There is still a lot to be done in driving economy growth in Nigeria. So many sectors are still trying to recover from the pandemic. Many factories were closed down. The government has rolled out so many policies and incentives. A number of them are just being implemented.”
