‘Telecoms Contribution to GDP Will Take Nigeria Out of Recession’  

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By Emma Okonji

Senior Economist in charge of Africa and the Middle East, for Bloomberg Intelligence, Mr. Mark Bohlund, has predicted that telecommunications’ contribution to Nigeria’s Gross Domestic Product (GDP) could expand the country’s economy and completely move it out of recession.

Bohlund, who made the disclosure in a recent report on Nigeria economy released by Bloomberg, said his prediction was based on the trajectory of telecommunications industry and its contribution to GDP in recent times.

To buttress the prediction, the Executive Vice Chairman of the Nigerian Communications Commission (NCC), Prof Umar Garba Danbatta had last week, said the telecoms sector contributed N1.549 trillion to GDP in the second quarter of 2017, representing 6.68 per cent increase, up from the N1.452 trillion it contributed in the first quarter of the year.

Bohlund noted that a sharp decline in telecoms output was responsible for a large part of the weakness in service-sector growth of the country in the second quarter of the year.

“This should ease soon, while higher oil revenue may help the construction and real estate sectors to recover. As a result, Bloomberg Intelligence Economics still expects the economy to expand by 1-1.5 per cent in 2017 as a whole, but the trajectory of the telecoms industry will be the wild card for second-half growth,” Bohlund said.

He explained that Nigeria’s real GDP rose by 0.55 per cent year-over-year in the second quarter, missing the median forecast of economists of 1.3 per cent in a Bloomberg News survey.

He said part of the shortfall could be explained by a revision to first quarter growth to -0.91 per cent from -0.52 per cent previously, largely because of a downward adjustment to oil and gas GDP in the quarter.

“A seasonal adjustment by Bloomberg Intelligence Economics showed the economy expanding by 0.7 per cent quarter-over-quarter in second quarter, but this was almost entirely because of higher oil output with the non-oil sector flattening.

The service sector actually shrank 0.8 per cent in second quarter, raising doubts about to what extent the economy is recovering beyond the increase in oil output. The poor service sector performance largely reflected a sizable contraction of about -2.9 per cent in the telecom sector, which constitutes around 9 per cent of total services GDP.

Telecoms had previously shown more resilience to the sharp drop in oil revenue since mid-2015 than other sub-sectors in the category,” Bohlund noted.

He further explained that it remained unclear to what extent this collapse in telecom output in second quarter is related to regulatory efforts to deactivate improperly registered mobile phone users, partly due to security concerns.

MTN Group Ltd., Africa’s largest mobile-network operator by subscriber number, removed about seven to eight million subscribers that were not considered active. It remains to be seen to what extent these removals continued in the third quarter or how it will affect telecom revenue during the quarter.

“A recovery in telecoms output may boost service-sector growth. The real estate and constructions industries could also support growth. The two sectors combined account for about 11 per cent of current GDP and as such have a larger direct impact on real GDP growth than the crude petroleum and natural gas sector, Bohlund stressed.