LCCI: Service Sector-induced GDP Growth Unreliable

Dike Onwuamaeze

Despite the positive growth trajectory that was recorded in Nigeria’s 4th quarter 2024 Gross Domestic Product (GDP), the Lagos Chamber of Commerce and Industry (LCCI) has warned that disproportionate reliance on the services sector while contributions from agriculture and manufacturing sectors are declining is a matter of critical concern for productivity and stability of the Nigerian economy.

The chamber expressed this view yesterday in a public statement titled: “Nigeria’s Economy Grows by 3.40% in 2024: LCCI Calls for Sustained Reforms,” and  signed by the Director General of LCCI, Dr. Chinyere Almona.

“While the GDP growth figures indicate a positive trajectory, they raise critical concerns regarding real productivity and economic stability. The disproportionate reliance on the services sector, with declining contributions from agriculture and manufacturing poses sustainability risks.

“Economic growth driven largely by trade and finance must be complemented by robust industrial and agricultural expansion to create quality jobs, enhance value addition, and ensure food security,” she said.

She pointed out that the Q4 2024 GDP growth was primarily driven by the services sector, which accounted for 57.38 per cent of the economy, reflecting its increasing role in job creation and economic activity.

“The agriculture sector contributed 25.59 per cent while industry accounted for 17.03 per cent. Notably, the petroleum refining sector recorded a remarkable recovery, growing by 9.6 per cent, likely due to the commencement of refining operations at the Dangote Refinery and improved output from the NNPC refineries.

“However, the manufacturing sector’s contribution declined to 8.07 per cent from 8.23 per cent in Q4, 2023, highlighting persistent structural constraints,” the LCCI said.

It added that the latest GDP, which indicated an overall growth of 3.40 per cent in 2024, with a Q4 growth rate of 3.84 per cent marked a notable acceleration from the 2.74 per cent recorded in 2023, demonstrating economic resilience despite prevailing macroeconomic and structural challenges.

According to the organisation, the GDP performance underscored the continued dominance of the non-oil sector, which contributed 94.49 per cent to total GDP while the oil sector accounted for 5.51 per cent.

“While the Q4’24 GDP report signals progress, sustaining and accelerating growth will require bold and strategic policy interventions. The government’s commitment to economic diversification, fiscal discipline, and business-friendly policies will be key to achieving the ambitious goal of a $1 trillion economy,” Almona said.

The LCCI noted that despite improvements in oil production, which averaged 1.54 million barrels per day  in Q4 2024, the sector’s contribution to GDP remained limited as oil sector volatility continued to expose the economy to external shocks, which underscored the urgency of diversifying the revenue base.

It said that Nigeria must address structural bottlenecks that hinder productivity across key sectors in order to achieve a sustainable and inclusive growth trajectory.

The LCCI, therefore, called for the development of a comprehensive industrialisation strategy to boost local manufacturing capacity.

It also urged the federal government to prioritise implementation of policies that incentivise domestic production, enhance the ease of doing business and facilitate access to finance for Small and Medium Enterprises (SMEs). 

The chamber argued that increased investment in mechanisation, irrigation, and improved seed varieties are essential, given the agricultural sector’s critical role in employment and food security.

It said: “Policies to enhance rural infrastructure, market access, and value chain development should be pursued aggressively.

“Addressing Nigeria’s infrastructure deficit, particularly in power, roads, and ports, is crucial to reducing production costs and enhancing competitiveness. Public-Private Partnerships (PPPs) should be expanded to bridge financing gaps in critical infrastructure projects.”

It also said that the proposed tax reforms should be well communicated and with a definite implementation strategy to support economic expansion without overburdening businesses.

LCCI said: “We need a transparent and equitable tax regime that promotes investment and encourages compliance. Ensuring exchange rate stability is vital for investor confidence and economic planning. Therefore, the Central Bank of Nigeria (CBN) should continue to adopt policies that facilitate liquidity, stabilise the Naira and encourage capital inflows.

“Addressing insecurity, particularly in agrarian regions, is critical for sustained growth. The government should intensify efforts to curb banditry, kidnapping, and other threats that deter investments in agriculture and industry including the constitutional amendment to enable multi-level policing.”