Experts tie Nigeria’s falling GDP to weak Naira, others

EXPERTS have attributed the drop in the nation’s real Gross Domestic Product (GDP) value from 6.77 per cent to 5.94 per cent in the fourth quarter of 2014, to decline in the manufacturing capability of the economy, in addition to Naira devaluation and fall in world oil prices.

Lead Economist (Macroeconomics and Fiscal Management, Governance, Poverty, Jobs, & Gender) at the World Bank, Khwima Nthara, had in an exclusive chat with The Guardian pinpointed the role played by lower manufacturing activities in the period under review, adding also that the drop did not occur in isolation of poor performances by other key sectors.

He explained that a combination of slow performance in the oil refining, chemical and pharmaceutical products, electricity, steam and conditioning supply also accounted for the slope.

Recent GDP overview for the fourth quarter of 2014 by National Bureau of Statistics (NBS), indicate that the nation’s economy grew by 5.94 per cent (year-on-year), but the current figure was observed to have been lower by 0.83 per cent when compared with value recorded in the fourth quarter of 2013. The current GDP was also noted to have been lower by 0.28 per cent from figures of the third quarter of 2014.

“What the NBS report says is that the rate of growth of the economy in the 4th quarter was 0.83 per cent lower than in the fourth quarter of 2013. One has to look at some of the sectors that did not do as well in the 4th quarter of 2014 compared to the fourth quarter of 2013. From the report, it seems the lower GDP growth rate was largely due to manufacturing which grew only by 13.47% in the 4th quarter of 2014, compared to 24.59% in the 4th quarter of 2013. In particular, this was due to sluggish performance in oil refining and chemical and pharmaceutical products.

Another sector that did not perform well in the period was electricity, gas, steam, and conditioning supply. In the quarter, it grew by 2.81 per cent compared to 25.71 per cent in 2013, although much better than the 3rd quarter of 2014 when it contracted by -21.57 per cent. Unfortunately, it is not possible to understand why these sectors performed poorly in the 4th quarter of 2014 compared to the same quarter in 2013”, he said.

Also, a top source at the National Bureau of Statistics who craved anonymity, told The Guardian in Abuja that a survey conducted by the Bureau prior to release of the Q4 figures, point to the fact that devaluation of the Naira, especially in relation to the Dollar, impacted negatively on the GDP value. He noted also that the slump in world crude price also significantly affected the nation’s GDP value.

“The GDP is basically a measurement of monetary value of all the finished goods and services produced within a country’s borders in a specific time period. So, it is expected that, given the scenario we are in, where there has been a recent drop in world oil prices, coupled with the devaluation of the Naira, the GDP will be affected. You are aware of the falling oil prices. That has poses a challenge to the economy, even though this is not the first time the price of oil will fall. There may be other reasons, but these two causes are key. Mind you ,it is not unusual for GDP value to drop. It happens all over the world, and there can be a rebound even in the next review”, the source stated.

The World Bank expert had earlier in a sector-by-sector basis explained the implications of the observed economic growth in the quarter under review.”When they say that an economy grew by 5.94 per cent, what it means is that the value of goods and services produced within Nigeria during the 4th quarter of 2014 went up on average by 5.94 per cent, compared to the value of goods and services during the same 4th quarter in 2013, but valued at 2010 prices, which is the new base year for Nigeriaís GDP.