By Omoniyi Salaudeen
Nigeria is a country with prodigious capacity for spinning surprises, even where all hopes seem to have been lost. Though not without some challenges, it is a pleasant surprise to many analysts that the economy could exit recession amidst the second wave of COVOD-19 pandemic earlier than predicted by the management team.
As recently indicated by the National Bureau of Statistics (NBS), Nigeria’s economy exited recession with an expansion of the Gross Domestic Product (GDP) by 0.11 per cent in the last quarter of 2020 contrary to the 3.6 per cent decline experienced in the third quarter of the same year, which plunged the country into recession.
The breakdown of the released figure showed that growth in agriculture and telecommunications offset a sharp drop in oil production by 1.56 barrels per day in the fourth quarter of the previous year.
According to economic experts, this development is a good omen for the country, as it gives a bright hope that the economy may recover faster than expected.
It is also a pointer to the growing importance of the non-crude sector. In a sharp departure from the previous years, the non-oil economy expanded by 1.7 per cent with agriculture constituting 3.4 per cent and telecommunications 17.6 per cent.
In spite of this positive indicator, there are strong concerns about the negative effects of naira devaluation, high inflation, as well as foreign-exchange shortages on the ordinary people. All of these, experts say, will continue to pose risks to the economy.
A renowned economist and former President of the Nigeria Institute of Bankers, Prof Segun Ajibola, analysing the situation, attributed the development to the various policies of government and expressed optimism that exit of Nigeria from recession would boost investors’ confidence both foreign and local in the economy.
He said: “To declare that economy is in recession is not a good title. It is like a very handsome man with a leprous hand. People will run away from him. That is the impact of recession. So, to say that an economy is out of recession is a very cheering news item because where we belong in the comity of nations will change to positive side. Our trading partners will now be rest assured that we are no longer carrying that stigma.”
According to him, the 0.11 per cent expansion of the GDP is a breakeven point, and such, much still needs to be done to sustain the performance.
He explained: “What the figure is saying is that Nigeria has broken even because 0.11 per cent is a breakeven point. This is as a result of the policy initiatives of the CBN and various arms of government.
“GDP is an aggregation of the value of all economic activities in an economy. And we could note that we had gradual improvement in some of the key sectors of the economy in the last quarter of last year especially in oil and gas. We also saw some positive shifts in agriculture, transport and communication. There was equally an improvement in small scale enterprises because of the policy initiatives introduced by the various arms of government. We saw the N50 billion loan to SMEs through the Central Bank. The sum total effect of these activities is the slight expansion of the GDP by 0.11 per cent. That is a breakeven point.”
The erudite professor, however, noted that poverty, rising inflation as well as dwindling value of the naira remained a major challenge that needed to be addressed to get the economy out of the woods.
He added: “But the fact is that there are still a lot of challenges in the economy. Inflation is climbing higher and higher. Exchange rate of Naira to the dollar is still depreciating. On the overall, the economy wellbeing of Nigerians is still a major challenge. Cost of living has gone up. Almost everything has import content. And because of exchange rate, prices of materials and finished good that are imported into Nigeria have gone up by what economists call cost-push inflation. So, things are still not easy for the majority of Nigerians. The poverty capital, the worrisome title that we earned, still remains with us. As at today, the money market has almost collapsed with interest hovering between one and two per cent. I am not sure the impact of being out of recession has not got to the average man on the streets. We still need to do a lot more as a country to improve economic welfare of the people.”
On how to sustain the performance, he further stressed the need for government at all levels to be more vigorous in the pursuit of their policy initiatives.
“What government needs to do now is to drive down some of the palliatives that we are talking about. They should drive down some of the incentives and initiatives that could improve businesses. They should see how the provisions of the budget which was signed to time can be well implemented to generate multiplier effect to make life better for the majority of the citizens. That is the major challenge before the country now,” he posited.
The Managing Director, Cowry Assets Management Limited, Mr. Johnson Chuwu, also examining the trend, traced the short period of the recession to the positive growth in the agricultural sector, ICT and communication, construction industry as well as real estate services sector.
He said: “It was a pleasant surprise to most people that Nigeria came out of recession in the last quarter of last year because most analysts expected that the economy would come out of recession in the first quarter of this year. But interestingly, the economy came out of recession in December 2020. That was a very short one.”
He, however, maintained that more is still needed to be made to reduce the current level of economic deprivation being experienced by the common people.
His words: “But with a growth rate of 0.11 per cent, a lot still needs to be done to reduce the level of despondency and economic difficulties being experienced by the people. If you look at the reports from the NBS, it is easy to know why the economy came out of recession so soon. Agricultural sector accounted for 26.96 per cent of the GDP. Trade sector is the second largest sector of the economy. Trade sector contributed more than 15.4 per cent to the GDP. ICT sector grew by 15.06 per cent, accounting for 15 per cent of the GDP. Manufacturing sector accounts for 8.6 per cent, oil and sector 5.8 per cent. So, if you add agricultural sector to the ICT, you already have more than 40 per cent of the economy. These contributions, added to construction industry and real estate services sector, will give you more than 54 per cent of the GDP. The sum total effect of all this was what actually pulled the economy out of recession.
“If we can stimulate growth in the trade sector and manufacturing sector, the economy will be growing above population growth rate. The current 0.11 per cent is still a far cry from the population growth rate of three per cent.
In order to sustain the gains so far recorded in the agricultural sector which contributed the chunk of the GDP, he said, appropriate policy measures must to be intensified to continue to support the sector. Failure to do so, he warned, the economy may still slide back into recession.
“For us to sustain this trend, agricultural sector has to grow by 6.95 per cent of the GDP because growth in the agricultural sector is more than a quarter of the entire productive activities in the economy. So, if that growth rate is disrupted as a result of heightened insecurity, Nigeria may still slide back into recession,” Chukwu warned.
For Chief Chekwas Okorie, the precipitate exit of Nigeria from recession is a clear pointer to the fact that the policies of the Buhari administration are working. He said in a telephone interview with Sunday Sun: “It is a good thing to hear that Nigeria exited recession earlier than projected by economic experts including the Central Bank. The earlier projection was that Nigeria would exit recession by the end of the first quarter of 2021. So, it is a very reassuring statement. That means the economic policies of government and the monetary policies of the Central Bank are beginning to work.
“People may say that it is not reflected in the economic lives of the average Nigerians. But what it means is that there is something President Muhammadu Buhari is doing well in spite of the doomsday’s prediction of the opposition that Nigeria will collapse. Some even went ahead to describe Nigeria as a failed state. This has proven that Nigeria is not about to collapse and it is not a failed state”.
In all, experts are unanimous in admitting the resilience of the Nigeria’s economy as a strong factor for its quick exit of the claw of recession, noting that the so-called advanced economies of the world are still grappling with the challenge of how to pull their countries out of doldrums.