…Privatize idle public assets —LCCI
By Kayode Tokede
Growth in telecommunications & information services, others drive Nigeria economy out of recession as Gross Domestic Product (GDP) grew by 0.11 per cent in fourth quarter ( Q4) of 2020, a report by National Bureau of Statistic (NBS) on Thursday disclosed.
Quarrying and other minerals (48.42 per cent); telecommunications & information services (17.64 per cent), cement (6.59 per cent), broadcasting (4.42 per cent) and crop production (3.68 per cent) were major drivers to GDP growth in the Q4 2020 under review.
The worst sectoral contractions were in Petroleum Refining (-56.5 per cent), air transport (-51.69 per cent), coal mining (-23.16 per cent), crude petroleum & natural gas (-19.76 per cent) and accommodation & food services (-15.03 per cent).
The NBS report had report 6.11 per cent contraction in Q3 2020, signaling Nigeria gradual recovery from recession when compared to 0.11 per cent reported in Q4 2020.
The NBS this in the GDP report (Q4 and Full Year 2020) said this represented the first positive quarterly growth in the last three quarters.
According to NBS, “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.
“As a result, while the Q4 2020 growth rate was lower than growth rate recorded the previous year by –2.44 per cent, it was higher by 3.74 per cent 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,” the report noted.
The NBS said overall, in 2020, the annual growth of real GDP was estimated at –1.92 per cent, a decline of –4.20 per cent when compared to the 2.27 per cent recorded in 2019.
It said in the quarter under review, aggregate GDP stood at N43.564 billion in nominal terms.
This performance, the bureau said was higher when compared to Q4 2019, which recorded a GDP aggregate of N39.577 billion, representing a year-on-year nominal growth rate of 10.07 per cent.
According to the NBS report, the oil sector, in Q4, showed an average daily oil production of 1.56 million barrels per day (mbpd) was recorded.
This was lower than the daily average production of 2.00 mbpd recorded in the same quarter of 2019 by -0.44 mbpd and Q3 2020 by –0.11 mbpd.
It added that real growth of the oil sector was –19.76 per cent (year-on-year) in Q4 indicating a decrease by –26.12 per cent relative to the rate recorded in the corresponding quarter of 2019.
“Growth decreased by –5.87 per cent when compared to Q3 2020, while quarter-on-quarter, the oil sector recorded a growth rate of –26.27 per cent in Q4.
“For 2020, the oil sector grew at –8.89 per cent compared to 4.59 per cent in 2019,” the report stated.
It added that the oil sector contributed 5.87 per cent to total real GDP in Q4, down from the corresponding period of 2019 and the preceding quarter, where it contributed 7.32 per cent and 8.73 per cent respectively.
The nation’s non-oil sector grew by 1.69 per cent in real terms in Q4 2020, slower than the 2.26 per cent recorded in the corresponding quarter of 2019, the NBS said.
It, however, said it was better than the –2.51 per cent growth rate recorded in the preceding quarter.
The NBS added that for the full year of 2020, the non-oil sector grew by –1.25 per cent compared to 2.06 per cent in 2019.
It said growth in the sector was driven by information and communication (Telecommunications and Broadcasting).
Other drivers were agriculture (crop production), real estate, manufacturing (food, beverage and tobacco), mining and quarrying (quarrying and other minerals) and construction, accounting for positive GDP.
“In real terms, the non-oil sector contributed 94.13 per cent to the nation’s GDP in Q4 2020, higher than the share recorded in Q4 2019 (92.68 per cent) and Q3 2020 (91.27 per cent).
“For 2020, the non-oil sector contributed 91.84 per cent to real GDP, higher than 91.22 per cent recorded in 2019,” the NBS report said.
From the non- oil sector, our correspondent gathered that the agricultural sector, in the fourth quarter of 2020, grew by 3.42 per cent (year-on-year) in real terms, an increase by 1.11 per cent points from the corresponding period of 2019, and an increase of 2.03 per cent points from the preceding quarter which recorded a growth rate of 1.39 per cent.
The report stated that, “The sector also contributed 26.95 per cent to the overall GDP in real terms in Q4 2020, higher than the contribution in Q4 2019 but lower than Q3 2020 which stood at 26.09 per cent and 30.77 per cent respectively.
“Real GDP growth in the manufacturing sector in the quarter under review stood at –1.51 per cent (year on year), lower than the corresponding period of 2019 and the preceding quarter by 2.75 per cent points and 0.01 per cent points respectively.
“The real contribution to GDP in Q4 2020 was 8.60 per cent, lower than the 8.74 per cent recorded in the fourth quarter of 2019 and 8.93 per cent recorded in Q3 2020.
“In real terms, the Trade sector contracted by 3.2 per cent (year-on-year) in the fourth quarter of 2020, which was 2.62 per cent points lower than the rate recorded in Q4 2019, and 8.92 per cent points higher than in the preceding quarter.
“Trade’s contribution to GDP was 15.46 per cent, which is lower than the 15.99 per cent it represented in the corresponding period of 2019, but higher than the 13.88 per cent recorded in the previous quarter.
“Information and communication recorded a growth rate of 14.95 per cent in real terms, an increase of 6.45% points over the corresponding period of 2019.
“The sector contributed 15.06 per cent to aggregate real GDP in Q4 2020, higher than the same quarter of the previous year in which it represented 13.12 per cent and higher than the preceding quarter, in which it represented 13.47 per cent.”
However, the Director General, Lagos Chamber Of Commerce And Industry (LCCI), Dr Muda Yusuf in his comments said the Chamber 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.
According to him, “Apart from declining growth, the economy is currently confronted with several challenges, including rising consumer prices (inflation now at 45-month high of 16.47per cent 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 addressthe structural challenges stifling productivity acrosssectors.”
He recommended that, Central Bank of Nigeria (CBN) needed to 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,” he said.
Other recommendations include, “Clarity in government’s policy direction is critical in deepening investor confidence.
“Mobilizing efforts in making the business environment more conducive for MSMEs and large corporate by addressing structural bottlenecks and regulatory constraints contributing to high cost of doing business.
“Prioritizing public spending to support critical capital development expenditures in road, railways, power, health, education, etc.
“Intensify diversification efforts through efficient utilization of excess crude oil proceeds to develop the non-oil sector.
“Privatize idle public assets to help the economy unlock liquidity needed for strong economic growth and improved revenue mobilization.
“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 utilization of petroleum resources; promote healthy competition and drive private investment in the oil & gas sector.
“Proper harmonization of fiscal and monetary policies is necessary in the course of stimulating domestic output and stabilizing 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.”