Despite Exiting Recession, FG Admits Growth Remains Fragile

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  •  Buhari expresses hope recovery will improve living standards
  •  Senate elated at improvement in nation’s economy

Omololu Ogunmade, Damilola Oyedele and James Emejo in Abuja

The federal government’s reaction Tuesday to the news of Nigeria’s emergence from the economic recession was subdued, as the government admitted that the country’s economic growth remained fragile and vulnerable, despite the cheering news from the National Bureau of Statistics (NBS) that the economy grew by 0.55 per cent in the second quarter of 2017, after five consecutive quarters of contraction.

The NBS Tuesday confirmed THISDAY’s exclusive report that the country’s gross domestic product (GDP) had grown by 0.55 per cent in Q2 2017, from -0.91 per cent in Q1 2017 and -1.49 per cent in Q2 2016.

However, reacting to the Q2 GDP report from the NBS, the Economic Adviser to the President, Dr. Yemi Dipeolu, cautioned that the economy remained vulnerable to “exogenous shocks or policy slippages”.

Dipeolu, who said the end of the recession was welcome, reasoned nonetheless that it was imperative to intensify the implementation of the Economic Recovery and Growth Plan (ERGP) as well as diversification of the economy to achieve the desired results.

“Overall, the end of the recession is welcome but economic growth remains fragile and vulnerable to exogenous shocks or policy slippages.

“Accordingly, it remains essential to intensify efforts going forward on the implementation of the ERGP to achieve desired outcomes including sustained inclusive growth, further diversification of the economy, the creation of jobs and improved business conditions,” he said.

Dipeolu, who said the GDP figures gave cause for “cautious optimism” in the face of falling inflation, pointed out that unemployment and food inflation have remained high as a result of the cost of transportation and what he described as seasonal factors.

“The GDP figures give grounds for cautious optimism, especially as inflation has continued to fall from 18.72 per cent in January 2017 to 16.05 per cent in July 2017.

“Foreign exchange reserves have similarly improved from a low of $24.53 in September 2016 to about $31 billion in August 2017.

“Unemployment, however, remains relatively high, but job creation is expected to improve as businesses and employers increasingly respond more positively to the significantly improving business environment and favorable economic outlook.
“Besides, as key sectoral reforms in both oil and non-oil sectors gain traction, the successful implementation of ERGP initiatives such as N-Power and the social housing scheme will boost job creation.

“Food inflation also bears watching, as it has remained quite high and volatile due mostly to high transport costs and seasonal factors such as the planting season.

“Investments in road and rail infrastructure increased supply and availability of fertilizer and improvements in the business environment should contribute to the easing of food prices,” he pointed out.

The economic adviser described the positive growth of the economy as the bye-product of output from both the oil and non-oil sectors, disclosing that the growth in the oil sector was predicated on its stability, compared to the crisis it experienced last year.

However, he noted that even though the non-oil sector was characterised by successive quarterly growth, the growth was not as strong as the Q2 2016 due to the fragile economic conditions.

Describing the consistent growth in agriculture at 3.01 per cent as encouraging, Dipeolu also said growth in the manufacturing sector was positive even though it was lower than its performance in the previous quarter.

He further noted that growth in industry, electricity and gas, foreign trade and capital importation as well as improved foreign exchange, all contributed to Nigeria’s economic progress.

“The figures released by the National Bureau of Statistics for the second quarter of this year (Q2 2017) showed that the economy grew in Q2 2017 by 0.55 per cent, from -0.91 per cent in Q1 2017 and -1.49 per cent in Q2 2016.

“This in effect means that the Nigerian economy has exited the recession after five successive quarters of contraction.
“This positive growth is attributable to both the oil and non-oil sectors of the economy. Growth in the oil sector, which has been negative since Q4 2015, was positive in Q2 2017. It rose by 1.64 per cent as compared to -15.60 in Q1 2017, an increase of up to 17 percentage points.

“This improvement is partly due to the fact that oil prices which have improved slightly from the lows of last year have been relatively steady as well as the fact that production levels were being restored.

“The non-oil sector grew by 0.45 per cent in Q2 2017, a second successive quarterly growth after growing by 0.72 per cent in Q1 2017. This growth, which was not quite as strong as it was in Q2 2016, reflects continuing fragility of economic conditions.

“However, given that nearly 60 per cent of the non-oil sectors’ contribution to GDP is influenced by the oil sector, growth in the oil sector will help boost the rest of the economy.

“The positive growth seen in agriculture when the rest of the economy was contracting was maintained at 3.01 per cent which is encouraging, especially if seasonal factors are taken into account.

“Manufacturing growth was also positive at 0.64 per cent and although lower than the previous quarter’s growth of 1.36 per cent, it was a noticeable improvement over the -3.36 per cent experienced in Q2 2016 and a continuation of the turnaround of the sector. Solid minerals which remain a priority of the administration, also continued to grow.

“Overall, industry as a whole grew by 1.45 per cent in Q2 2017, after nine successive quarters of contraction starting in Q4 2014.

“This positive development was somewhat overshadowed by the continued decline in the services sector which accounts for 53.7 per cent of GDP.

“Nevertheless, electricity and gas, as well as financial institutions, grew by 35.5 per cent and 11.78 per cent respectively in Q2 2017.

“The GDP figures give grounds for cautious optimism especially as inflation has continued to fall from 18.72 per cent in January 2017 to 16.05 per cent in July 2017.

“Foreign exchange reserves have similarly improved from a low of $24.53 in September 2016 to about $31 billion in August 2017.

“In the same vein, capital importation grew by 95 per cent year-on-year, driven by portfolio and other investments but also notably by foreign direct investment which increased by almost 30 per cent over the previous quarter.

“Foreign trade has also contributed to improving economic conditions with exports amounting to N3.1 trillion in Q2 2017 while imports which increased by 13.5 per cent amounted to N2.5 trillion in the same period. The overall trade balance thus remained positive at N0.60 trillion,” he stated.

Also reacting to the NBS report, President Muhammadu Buhari Tuesday said the real impact of the end of recession would be better felt when ordinary Nigerians experience a meaningful improvement in living standards.

Buhari, according to a statement by his spokesman, Malam Garba Shehu, made the remark while receiving the President of Niger, Alhaji Mahamadou Issoufou, in Daura, Katsina State.

According to Shehu, Buhari was “very happy” to hear that the country was finally out of the recession, adding that the real gain would be improved living standards for Nigerians.

He quoted the president as saying, “Certainly I should be happy for what it is worth. I am looking forward to ensuring that the ordinary Nigerian feels the impact.”

The statement added that Buhari commended all managers of the economy for their hard work and commitment, observing that more work needed to be done to improve the growth rate.

“Until coming out of recession translates into the meaningful improvement in peoples’ lives, our work cannot be said to be done,” the president was quoted to have said.

The statement also said the Nigerien president, in his remarks, said he was very delighted to see Buhari in good health and prayed the Almighty God to continue to strengthen him.

“President Issoufou said he used the opportunity of the visit to discuss some bilateral and regional issues with President Buhari, which included the fight against Boko Haram, the economic challenges in the Lake Chad Basin and other developmental concerns that directly affect the livelihoods of the citizens of both countries.

“The Nigerien president was accompanied on the visit by a former prime minister of the West African country, Dr. Hamid Algabid, and the President of the Economic, Social and Cultural Council of Niger, Mr. Moussa Moumouni Djermakoye,” the statement added.

In its comment on the NBS data, the Senate also expressed happiness at the report confirming that the country’s economy grew by 0.55 per cent in the second quarter of 2017.

In a statement signed by its spokesperson, Senator Aliyu Sabi Abdullahi, the Senate described the development as a commendable one, coming after five consecutive quarters of contraction.

The Senate said the improved performance of trade, manufacturing, agriculture and oil sectors was an indication that with carefully aligned policies and legislative interventions, Nigeria’s economy could thrive beyond current forecasts and expectations.

“The Senate received the Q2 NBS economic report with great excitement. We are delighted that government’s response to the economic recession has began to yield tangible results,” the statement read.

“The public will recall that in the days following the announcement of the 2016 recession, the Senate initiated steps and tabled 21 recommendations that it submitted to the executive for immediate action.

“We also listed out economic priority bills, many of which have now been passed, or at the final stage.
“We are also happy to note that many of the economic recommendations, specifically in the areas of retooling our agriculture and trade policies were adopted.

“This shows that the ‘all hands on deck’ approach was necessary from both branches of government,” it observed.

The Senate added that although the nation was now out of the recession, it was still committed to ensuring that the high rate of unemployment and the high cost of living are reduced.

“Rising unemployment in the country is an issue that is of much concern to all of us. Additionally, the rising cost of food prices and basic services in the country still affects millions of households.

“That is why we will continue to work on our laws, specifically in the areas of access to credit to promote more opportunities for small business owners, and opening up more sectors to private sector participation, so that there will be more competition in our markets — which will lead to lower prices.

“We will also continue to work with the executive to ensure that our policy and legislative objectives, specifically as they relate to the economy, are well-aligned,” the Senate said.

Similarly, the Speaker of the House of Representatives, Hon. Yakubu Dogara, expressed delight over the latest report of the NBS indicating that the country had exited the recession.

In a statement issued Tuesday night by his spokesman, Turaki Hassan, the Speaker said the House was gladdened by the performance of the economy in the last quarter.

He said this positive result was an indication that the economic policies of the APC administration are on track.
He said the task ahead was to ensure sustained efforts by both the executive and the legislature in fast-tracking programme implementation for even more rapid economic growth and development.

According to him, “We must now channel our energies towards measures aimed at job creation for millions of Nigerians, addressing the widening socio-economic inequalities, and creating opportunities for all Nigerians.

“The House of Representatives will more than ever before step up its partnership with the executive in this regard by introducing as well as supporting all measures designed to boost the economy and put food on the tables of all Nigerians.

“This informed the passage of the Federal Competition and Consumer Protection Commission Bill which should go a long way in attracting foreign direct investment, creating job opportunities for our people and providing a healthy and conducive business environment for the private sector to thrive.

“We will implore the president to assent to this revolutionary bill as soon as it is concurred by the Senate and transmitted to him.”