Nigeria might be gradually taking steps towards achieving the 2021’s projection by the International Monetary Fund, as the latest figure on the Gross Domestic Product shows a slight increase by 0.15 percent within three months.
The National Bureau of Statistics published that the GDP real terms growth is the second consecutive growth after the negative growth rates recorded in the
second and third quarters of 2020– which plunged the nation into another recession.
GDP is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year.
GDP growth rate is an important indicator of the economic performance of a country.
The first quarter growth rate is subsequently higher than 0.11percent recorded in the previous quarter (Q4 2020) but lower than the 1.87 percent growth recorded in the corresponding quarter of 2020 (Q1 2020).
According to the report, in nominal terms, aggregate GDP stood at N40.01 trillion against N35.65 trillion recorded in Q1 2020, while real GDP stood at N16.83 trillion in the quarter under review.
At the beginning of the year, the IMF said Nigeria’s recovery from the impact of the COVID-19 is expected to be weak and gradual under current policies adding that the country’s real GDP is expected to recover to its pre-pandemic level only in 2022.
Twentyten Daily reported that, according to the IMF, the real GDP growth in 2021 was expected to turn positive at 1.5 per cent.
“Nigeria’s recovery is expected to be weak and gradual under current policies. Real GDP growth in 2021 is expected to turn positive at 1.5 per cent. Real GDP is expected to recover to its pre-pandemic level only in 2022.
“The COVID-19 pandemic has placed Nigeria at a critical juncture. The country entered the crisis with falling per capita income, high inflation, and governance challenges.
“Policy adjustments and reforms designed to shift the country from its dependence on oil and to diversify the economy toward private sector-led growth will set Nigeria on a more sustainable path to recovery.”
It noted that Nigeria’s economy had been hit hard by the COVID-19 pandemic following a sharp drop in oil prices and capital outflows. Also, the real GDP was estimated to have contracted by 3.2 per cent in 2020 amidst the pandemic-related lockdown.
Revising The Projection
In its World Economic Outlook, in April, IMF raised Nigeria’s growth forecast for 2021 to 2.5 percent.
It said, “After an estimated contraction of –3.3 per cent in 2020, the global economy is projected to grow at six per cent in 2021, moderating to 4.4 per cent in 2022.
“The contraction for 2020 is 1.1 percentage points smaller than projected in the October 2020 World Economic Outlook, reflecting the higher-than-expected growth outturns in the second half of the year for most regions after lockdowns were eased and as economies adapted to new ways of working.
“The projections for 2021 and 2022 are 0.8 percentage point and 0.2 percentage point stronger than in the October 2020 WEO, reflecting additional fiscal support in a few large economies and the anticipated vaccine-powered recovery in the second half of the year”, the report read.
The new projection for IMF was coming after sectoral performances as well as the Purchasing Managers Index has shown improvement after observations.
Sectoral Performances In Q1
The average daily Oil production sector, in the first quarter, stood at 1.72 million barrels per day with a GDP growth rate of –2.21percent.
This was a decrease from a daily production of 2.07mbpd recorded in the corresponding quarter of 2020 and a growth rate 5.06 percent.
The Non-oil sector grew by 0.79% in real terms in Q1 2021, which was –0.75% points lower compared to the rate recorded in the same quarter of 2020.
The Agricultural sector grew by 2.28% in real terms in Q1 2021, with an aggregate real GDP of N3.76 trillion. The sector accounted for 22.35% of the total.
The Mining and quarrying sector contracted by 2.19% in Q1 2021, as against 4.58% growth recorded in the corresponding quarter of 2020. It however improved compared to a contraction of 18.44% recorded in Q4 2020.
Also, the Manufacturing sector grew by 3.4%, indicating the first expansion in the past three quarters.
The Financial and insurance sector contracted by 0.46% compared to a growth of 20.79% recorded in Q1 2020, and a 3.63% contraction in Q4 2020.
Information and communication sector recorded a growth of 6.31% in Q1 2021, largely driven by growth recorded in the telecommunications sub-activity (+7.69%).
The Electricity, Gas, Steam and Air conditioning Supply sector grew by 8.66% in Q1 2021, an improvement from the growth rate of –2.31% recorded in the same quarter of 2020. When compared to the immediate past quarter, there was an increase of 11.17% points from –2.51% recorded.
The Construction sector grew by 43.88% in nominal terms (year on year) in the first quarter of 2021, a drop by –0.38% points compared to the rate of 44.26% recorded in the same quarter of 2020.
The nominal year on year growth rate of the Trade sector stood at 0.13%. This indicates an increase by 0.40% points when compared to the Q1 2020 growth rate of -0.27% and 0.79% points higher than the preceding quarter growth rate of –0.66%.
The Administrative and Support Services sector grew by 1.83% (year on year) in Q1 2021, higher by 1.15% points compared to the first quarter of 2020 and 4.66% points higher than the growth rate in the preceding quarter.
Real Estate Services grew by 8.04%, or 6.92% points higher than the growth rate reported for the same period in 2020 but lower by -1.11% points compared to the preceding quarter.
The Accommodation and Food Services sector grew by 11.39% year on year in Q1 2021. This represented a decline of –1.88% points relative to the same quarter of 2020 when the growth rate was 13.27%.
The Transportation and Storage sector grew by –9.25% in nominal terms in the first quarter of 2021 (year on year). This rate was lower relative to the figure of 20.44% recorded for the corresponding quarter of 2020 and –3.76% recorded in the previous quarter.
The Public Administration sector grew by 1.72% in Q1 2021, higher by 8.05% points from the corresponding quarter of 2020 but lower by –2.76% points relative to Q4 2020.
Education sector in the first quarter of 2021 was –0.30% (year-on-year), down by -7.33% points from the growth of 7.03% reported in the corresponding quarter of 2020, but 5.56% points higher when compared to Q4 2020 growth rate of –5.86%.
The Arts, Entertainment and Recreation sector grew by –0.47% in the first quarter of 2021 (year-on-year), representing an increase of 0.40% points relative to the preceding quarter growth rate of -0.87%,
Professional, Scientific and Technical Services recorded a nominal growth of -1.31% (year-on-year), which is –3.54% points lower than Q1 2020, but 1.64% points higher than the rate recorded in Q4 2020.
Human Health and Social Services in nominal terms was 10.84%, higher than the growth rate of 7.03% reported in the same quarter of 2020 by 3.80% points and by 1.69% points compared to Q4 2020.
Other Services grew by –0.41% (year-on-year) in Q1 2021. This growth rate was lower than the 3.71% growth rate recorded in the same quarter of the previous year but higher than the growth rate of -1.76% recorded in Q4 2020 by –4.11% points and 1.36% points respectively.
Expert Laments On Slow Growth
According to the Punch, economic and financial experts have raised concerns as the Nigerian economy grew, the chairman of Foundation for Economic Research and Training, Prof. Akpan Ekpo, said, “The growth rate is still sluggish and fragile, below what we expected. It is lower than the population growth rate which is about three per cent. Do not forget there is also high inflation and unemployment, especially among the youth.”
“We should maintain the growth trajectory but we need to understand the distinction between growth and development, as growth is not equal to development.”
A professor of political economy, Prof. Pat Utomi, said long term strategy was required for sustainable economic growth.
He said, “Looking at our population growth rate and the slow progress we have made with the Millennium Development Goals, the apparent positive flux is on the back of improved oil prices.
“Coming out of the COVID-19 induced recession, the rise of oil prices will naturally provide a boost to the GDP. But it is not sustainable, therefore the country has to diversify its export earnings away from oil.
“Import restrictions, bans and tariffs are short term strategies. We need long term strategies, an example of which is the CBN’s provision for the Export Promotion Council to fund Agricultural Exports. It is a good plan, but needs transparency and accountability to succeed.”
A professor of capital market at the Nasarawa State University Keffi, Uche Uwaleke, said the GDP report reflected an economy already on the path of gradual economic recovery.
“But the report also reveals a 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.
“That the non-oil sector dropped should be of concern to both the fiscal and monetary authorities.”