Economy’s GDP positive, but still weak, say experts

The nation’s economy in the third quarter (Q3) of 2019, recorded 2.28 per cent in Gross Domestic Product (GDP), an improvement from two per cent in Q2, but experts have also described it as weak.

The argument is based on the fact that the growth has remained sluggish since its recovery from the recession in 2017, but revolves around the same pattern while falling below the population growth rate.

According to the National Bureau of Statistics (NBS), it was growth recorded from the Information, Communications, and Technology (ICT) sector that powered the rebound.

The growth, though soft, was higher than the revised 2.1 per cent Q2, this becoming the highest since Q4 2018, supported also by a slow, but increasing growth in the non-oil sector.

There was improved performance in the ICT sector relative to the slowdown seen in the previous quarter, as growth stood at 9.9 per cent yoy, against nine per cent in previous quarter.

Similarly, the telecommunications sector expanded, maintaining its double-digit growth at 12.2 per cent yoy, compared with 11.3 per cent Q2.

Growth in the oil sector slowed at 6.5 per cent year-on-year (yoy) in Q3, compared with 7.2 per cent Q2.
Analyst at Afrinvest Securities Limited, attributed this to a weak base given a 5.2 per cent yoy increase in oil production to 2.04mbpd.

“The non-oil sector drove growth in Q3, following a still weak, but increasing growth at 1.9 per cent yoy, against 1.6 per cent in Q2, buoyed by a broad-based improvement in major sub-sectors.

“Growth in the agriculture sector expanded to 2.3 per cent yoy in Q3, against 1.8 per cent in Q2, although still slower than 3.2 per cent growth recorded in Q1.

“The major sub-sectors recorded broad-based increase, following a faster rise in crop production at 2.4 per cent yoy, against 1.9 per cent in Q2, as well as a 0.02 per cent recovery in livestock sub-sector versus 0.01 per cent in Q2.

“The expansion in the agriculture sector reflects improved activities due to the onset of harvest season during the quarter.

“However, the sector remains threatened with persistent security issues affecting production in Northern Nigeria, although we expect improved performance for the rest of the year,” the analysts said.

But the Lead Director of Centre for Social Justice, Eze Onyekpere, told The Guardian that considering Nigeria’s poor credentials in inclusive and sustainable growth, new policy measures are needed to drive economic growth to not less than 8% per annum, with a road map for its sustainability for not less than 10 years.

“This is possible if the political will is combined with getting the best hands to run the economy and thinking through policy measures before they are implemented.

“For example, the prevailing border closure is not a sustainable intervention over the medium term. Again, federal and state budgets must be primed to create domestic jobs through mainstreaming local content in government commerce, as well as tapping locally available resources for infrastructure expansion.

“This cannot happen when every agency of government wants to drive a foreign SUV while abandoning the products of our motor manufacturing and assembly plants.

“The idea that building new infrastructure or refurbishing existing ones is only possible with Chinese or other foreign loans must be discarded.

“The mantra of value chains in agriculture must be made real through a collaboration between the research institutes, farmers, processors/small and medium scale enterprises,” he said.

Speaking on the Finance Bill, which would soon become an Act, he said it is a welcome development, as it would first, provide more revenue for the cash-strapped government, to execute projects and support growth.

“The second reason is that since Nigerians, especially the elite, will pay more in tax, they will become more interested in holding governments at all levels to account for the use of public resources.

“This will ultimately improve transparency and accountability, value for money and over the years, propel economic growth and development,” he added.

Further analysis of the growth report showed that the manufacturing sector ended its long contraction, growing at 1.1 per cent YoY in Q3, against minus one per cent in Q2, driven by improved performance across board.

Surprisingly, the cement sub-sector recorded a strong performance in the quarter, with a sharp rise of 6.9 per cent compared with 1.6 per cent in Q2, the highest since the third quarter of 2018.

The food, beverage and tobacco sub-sector also expanded faster to three per cent, relative to 1.2 per cent in Q2.

Similarly, the troubled textile, apparel, and footwear sub-sector improved to -1.1 per cent in the period under review from -1.4 per cent in Q2.

“We believe the lift in the manufacturing sector mirrors improved consumer spending in the quarter due to the implementation of the 2019 budget, although the performance of publicly listed manufacturing companies remains lackluster.

“We expect sustained improvement in the sector in Q4:2019 to be driven by the seasonal boost in demand, relatively stable exchange rates as well as the expectation of the new minimum wage implementation,” the analysts added.

The trade sub-sector remained underwater for the second consecutive quarter, dipping further to -1.5 per cent, against -0.3 per cent in Q2, partly reflecting pressures in the wake of the closure of land borders between Nigeria and neighbouring countries.

Meanwhile, the outlook for real growth in full-year 2019, has been retained below 2.3 per cent by many analysts, which is a far cry from the government’s projections at about three per cent.