The latest data from the National Bureau of Statistics (NBS) indicated that the nation’s Gross Domestic Product (GDP) slowed to an abysmal 1.94 per cent (year-on-year) in the second quarter (Q2) of 2019, compared to the 2.1 per cent recorded in the first quarter. This represents a decline of 0.16 per cent. The NBS report has shown that the economy is still vulnerable despite overcoming the 2016 recession. It is also a sign that the economy is yet to receive the required boost in government’s diversification effort in spite of the investment in the non-oil sectors of the economy.
The below par economic performance in the first half of the year means that government must put more effort to meet its growth target of three per cent in 2019. In other words, the disappointing Q2 performance of the GDP points out that the economy must grow at not less than 7 per cent in the third and fourth quarters to achieve the full-year set target of the government’s Economic Recovery and Growth Plan(ERGP). There are fears that if the economy continues to experience a contraction in GDP growth in the Q3 and Q4 2019, the economy is likely to witness another recession, which would make many foreign portfolio investors to exit the country.
Therefore, the government should intensify effort to diversify the economy beyond oil. According to the NBS report, in Q2 2019, Nigeria recorded average daily oil production of 1.98 million barrels per day or 7.6 per cent higher than the daily average production of 1.84mbpd recorded in the same quarter of 2018, but slightly less than output recorded in Q1 2019. The oil sector posted a real growth rate of 5.15 per cent (year-on-year) in Q2 2019, representing a 9.10 per cent points increase relative to the rate recorded in the corresponding quarter of 2018. It also indicates an increase of 6.61 per cent points when compared to Q1 2019.
Similarly, non-oil sector grew by 1.64 per cent, which means the sector contributed 91.18 per cent to the nation’s GDP. However, this is slightly lower than the share recorded in the second quarter of 2018 (or 91.45 per cent), but higher than the first quarter of 2019 (90.78%). The agricultural sector grew by 1.79 per cent in the second quarter of 2019 or 22.82 per cent to total GDP. A situation where the non-oil sector accounts for 90 per cent of the GDP and only 20 per cent of foreign exchange earnings is not good for the economy.
The poor GDP growth might have prompted President Muhammadu Buhari’s recent call on the Manufacturers Association of Nigeria (MAN) to reposition the economy in order to achieve industrial growth. The president had at the 47th Annual General Meeting of MAN, admitted that security challenges and lack of investment in productive rural economy had hampered economic growth. Nonetheless, we believe that government should do more to diversify the economy and broaden the revenue base. Without significant progress in the non-oil sector, the economy will not witness the expected growth. The economy requires massive rescue efforts to avoid relapsing into another recession. The Federal Government should also retool some of its economic policies to enhance the GDP growth. We urge the CBN to cut interest rates and put up measures that would attract foreign investments. The nation’s debt burden put at about N25trn is not healthy to the economy. More worrisome is the fact that servicing the debt gulps so much money. Further borrowing will definitely hurt the economy.
Rather, government should think of pragmatic ways to grow the economy. It should critically examine the factors that have weakened the nation’s economic growth and evolve strategies that will stimulate sustainable growth. No doubt, debt crisis, acute revenue shortfall, insecurity and unstable power supply might have stunted economic growth. What the second quarter result has revealed is that the economy is yet to be diversified and that productivity and capacity utilisation remain very low.
At 1.94 per cent GDP growth, the economy is moving nowhere to sustainable growth. With the population growth at about 3 per cent per annum and unemployment at over 21 million, the economy is still in bad shape. We, therefore, urge the government to see the NBS report as a reminder to promptly reposition the economy. With the inauguration of the ministers, we hope that something must be done to spur economic growth. The public-private partnership is vital to attract more private capital to the economy. The manufacturing sector needs increased lending. To avoid the fiscal crisis which the president alluded to recently, the government should devise measures to stimulate the economy.