By Bimbola Oyesola, Isaac Anumihe (Abuja) and Merit Ibe
Nigerians yesterday commented on the Gross Domestic Product (GDP) figures released by the National Bureau of Statistics (NBS) in which it registered 5.01 per cent growth (year-on-year) in real terms in the second quarter of 2021.
The latest growth, it said, is third quarterly growth following the negative growth rates recorded in the second and third quarters of 2020.
The Q2 2021 growth rate was higher than the -6.10 per cent growth rate recorded in Q2 2020 and the 0.51 per cent recorded in Q1 2021 year on year, indicating the return of business and economic activity near levels seen prior to the nationwide implementation of COVID-19-related restrictions.
The steady recovery observed since the end of 2020, with the gradual return of commercial activity as well as local and international travel, accounted for the significant increase in growth performance relative to the second quarter of 2020 when nationwide restrictions took effect. Year to date, real GDP grew 2.70 per cent in 2021 compared to -2.18 per cent for the first half of 2020.
According to a document obtained by Daily Sun, the upgrade in 2022, depends on the expected improvements in trade and oil productions.
Also, improvements in external financial conditions is expected to increase despite the bouts of volatility.
But while reacting to the figures released by the NBS, Nigeria’s Organised Private Sector noted that the improvement in the GDP numbers suggests the need to reset, rejjig and reform key sectors of the economy.
According to Dr. Muda Yusuf, economist and private sector advocate, though the 5.01 per cent GDP growth (year on year) is a welcome development, there is need to fix issues around regulatory environment, tax administration and the multitude of levies imposed on businesses at all levels of government.
Yusuf also called for reforms in the nation’s foreign exchange policies, ports infrastructure, and other structural bottlenecks to productivity in the economy.
“There are still worries about the macroeconomic challenges reflecting in spiralling inflation, weakening currency, forex market illiquidity and rising debt profile among others.
“The security situation remains a major source of risk inhibiting investments whether domestic or foreign,” he said.
Yusuf said that while it is good to celebrate the GDP growth numbers, this should be done cautiously.
He noted that the impact of the GDP growth on citizens welfare and the productivity in the investment environment are crucial, noting that those were the metrics that matter most, ultimately. He explained that the increase signposts an incremental recovery in the economy as well as reflects a gradual normalisation of economic and business activities in the country, stressing it was important to admit that there is a profound base effect in the Q2 GDP growth outcomes.
Economic activities were completely crippled, movement was restricted, supply chains collapsed etc.”
Yusuf opined that the 5.01per cent GDP growth is largely an indication of the restoration of economic activities, maintaining that the Nigerian economy is still essentially in a recovery phase.
Meanwhile, the Apapa branch chairman of Manufacturers Association of Nigeria (MAN), Mr. Frank Onyebu, in his reaction said, though the growth may sound cherry, when you look at it within the context of the sharp decline of the GDP last year, you will realise that there is nothing much to cheer about. The economy simply improved after a slump. In real terms, the economy is still struggling. And that is to put it mildly.
Aggregate demand is low – very low. And this is not surprising! The high rate of unemployment coupled with the current level of insecurity has had a very negative impact on the purchasing power of most Nigerians. This has adversely affected the manufacturing sector which has to contend with high inventory of finished goods. Most manufacturing companies are struggling – again, that’s putting it mildly. Many companies are in an existential crisis. Some have already shut down altogether. This could only worsen the already bad unemployment situation.
My advice to the government is to stop gloating over what I call an illusion and rather concentrate on policies and actions that could help the economy in real terms.