- Declining GDP numbers cast shadows on potency of Buhari’s ERGP
- “Agriculture is not just crops; when you destroyed a farmland (or even cattle-rearing), the back and forth are affecting both crop production and livestock and agriculture is the biggest part of our GDP and that is slowing down the economy.”
Isaac Anumihe, Abuja
The National Bureau of Statistics (NBS), on August 27, 2018, released its second quarter 2018 Gross Domestic Product (GDP) report, with woeful showing of the agriculture and oil/gas sectors of the economy.
According to the report, agriculture GDP grew by 1.19 per cent in the period under review as against 3 per cent in the first quarter of 2018.
This was further dented by crop production under agriculture which grew by 1.49 per cent in Q2 – the slowest growth since 1987 when it contracted by -4.0 per cent. The report also indicated that second quarter 2018 GDP growth was constrained by oil GDP with crude oil and gas production which contracted by -3.95 per cent compared to 14.77 per cent in Q1 2018 and 3.53 per cent in Q2 2017.
However, the bureau explained that non-oil GDP growth, which was -0.18 per cent in Q1 2016, -0.38 per cent in Q2 2016, 0.03 per cent in Q3 2016, -0.33 per cent in Q4 2016, 0.72 per cent in Q1 2017, 0.45 per cent in Q2 2017, -0.76 per cent in Q3 2017, 1.45 per cent in Q4 2017 and 0.76 per cent in Q1 2018 grew strongly in Q2 2018 by 2.05 per cent.
But overall, the non-oil growth in the period under review was driven by transportation, which grew by 21.76 per cent, supported by growth in construction with 7.66 per cent and electricity which grew by 7.59 per cent. Other non-oil sectors that drove growth in Q2 2018 include telecommunication, which grew by 11.51 per cent; water supply and sewage, which grew by 11.98 per cent, and broadcasting which grew by 21.92 per cent.
The bureau also said that non-oil sector performance was, however, constrained by agriculture that grew by 1.3 per cent compared to 3.00 per cent in Q1 2018 and 3.01 per cent in Q2 2017.
Second quarter 2018 GDP growth, it said, was also constrained by oil GDP with crude oil and gas production contracting by -3.95 per cent compared to 14.77 per cent in Q1 2018 and 3.53 per cent in Q2 2017 whereas services GDP recorded its best performance in nine quarters, growing by 2.12 per cent in Q2 2018 compared to -0.47 per cent in Q1 2018 and -0.85 per cent in Q2 2017.
This report, however, some observers have argued, fell short of the International Monetary Fund’s (IMF)’s forecast, which projected that Nigeria’s GDP growth rate would be 2.3 per cent for the quarter, with 2.1 per cent growth for 2018.
IMF announced the upgrade in its World Economic Outlook (WEO) Update in July 2018 titled, “Less Even Expansion, and Rising Trade Tensions”. The 2019 GDP growth forecast of 2.3 per cent announced for Nigeria was 0.4 percentage points higher than the 1.9 per cent released in April this year.
The upgraded forecast reflects improved prospects for Nigeria. “Its growth is set to increase from 0.8 per cent in 2017 to 2.1 per cent in 2018 and 2.3 per cent in 2019 (0.4 percentage points higher than in the April WEO for 2019) on the back of an improved outlook for oil prices. So far, the drop has triggered a number of commentaries from economic experts on the implication of the report to the economy.
A development economist, Mr. Odilim Enwegbara, for instance, said the drop in agriculture sector was because there is no evacuation system.
“Although farmers have produced enough, they cannot evacuate their produce. Also, people are not consuming because there is no money in the system. Government has actually mopped up money in the system. So, the economy is stagnant. The government has invested enough in agriculture, no doubt, but it did not invest in food processing, preservation and infrastructure. If someone in Sokoto produces, how can someone in Lagos get his produce?” he asked.
On the oil sector, Enwegbara said the economy is crying for diversification. “The economy is saying that you need to bring in the private sector into the system. The economy is saying that there should be heavy investment in the power sector. The economy is a process and that process will yield the right or wrong result. So, what I am saying is that we must diversify our economy from oil. To do that, we must invest in power.
“However, what I am seeing is that in a few months from now there will be more money in the system. But both local and foreign investors will sit on the fence to see what hap- pens in 2019. If the government insists on winning 2019 election, I assure you more foreign investors will be looking outside the country for investments. This is because every investor wants a conducive environment so that his investment will be protected.
Look at what the American President, Donald Trump, said about our president. Such comments can scare foreign investors. If you hear that there is a war somewhere, can you take your investment there? Investors don’t take their investment to where they will lose it,” he said.
But for a financial consultant, Bayo Rotimi, although the services sector, namely ICT, agriculture, manufacturing and solid minerals, led the marginal growth in the non-oil sector, there are concerns the government needs to redress.
“What the statistics show is that our economy is still over-dependent on oil. Between the first and second quarters, oil sector GDP growth declined by 18.71 per cent as a result of a drop in crude oil production from two million barrels to 1.64 million barrels per day.
“At a time of increasing crude oil price at the international market, the loss translates to about $1.1 billion on the average. So, if the oil sector, as the principal driver of the economy was struggling during the period under review, amid rising crude oil price at the international market, it was obvious the production elements in the industry were yet to be sorted out,” he said.
According to him, it should be of serious concern to Nigerians, particularly policy and decision-makers that at a time the country was facing less disruptions in oil operations resulting from attacks on oil facilities in the Niger Delta, oil production and exports dropped.
Although the production estimates in the 2018 budget targeted 2.3 million barrels a day, about two million barrels were realised in the first quarter, against 1.64 million barrels a day in the second.
While regretting the poor showing in the sector, he condemned the uncertainty in the regulatory framework. He wondered why the assent to theimf is still
pending since the harmonised copy was sent by the National Assembly on June 8.
Speaking on the figures on Arise TV, Statistician General of the Federation, Dr. Yemi Kale, had expected the numbers to improve. “But I expected the numbers should be much better. It is looking very similar to the first quarter. I think the economy is still struggling out of recession and
that is what the numbers are showing.
“For example, we have seen challenges in agriculture because of the clashes that are happening in different parts of the country. Obviously, if people cannot go to the farms, it is going to be a problem.
“Agriculture is not just crops; when you destroyed a farmland (or even cattle-rearing), the back and forth are affecting both crop production and livestock and agriculture is the biggest part of our GDP and that is slowing down the economy.”
According to him, the projection of IMF that the economy would grow by 2.1 per cent by
the end of 2018 is achievable.
Meanwhile, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, in
a statement regretted the slight drop in real GDP growth rate for the second quarter principally as a result of the contraction in the oil sector.
He said the average crude oil production was only 1.84 million barrels a day in Q2 2018 as opposed to an average production of 2 million barrels a day in Q1 2018. “Once these issues are addressed, we should be able to, once more, achieve positive growth in the oil and gas sector,” he noted.
He emphasised that the Nigerian economy needs growth from both the oil and the non-oil sectors to achieve its Economic Recovery and Growth Plan (ERGP) growth targets.
Another area of concern for government, he said, was the slightly weaker growth in the agriculture sector, which slowed to 1.19 per cent in the second quarter in 2018 compared to 3 per cent in the first quarter of 2018.
“This is partly attributable to security challenges mainly in the North East and North Central zones. These security challenges affected activities of farmers with the resultant impact on commodity output but that the various measures being taken by government to tackle the situation is already reducing incidents of violent conflicts and other disruptions to farming activity,” he said.
He, therefore, expressed optimism that a rebound in growth in the agriculture sector in sub-
sequent quarters was likely.
Udoma expressed satisfaction that the industry has continued to maintain a positive growth rate as a result of the performance of manufacturing and solid minerals, which retained positive growth of 0.68 per cent and 5.24 per cent respectively in the second quarter of 2018, while the services sector recorded its best GDP performance in nine quarters, growing by 2.12 per cent in the second quarter of 2018 compared to a contraction of -0.47 per cent in the first quarter of
the year and of -0.85 per cent in second quarter of 2017.