Analysts call for increased investment
Obinna Chima in Lagos and James Emejo in Abuja
Following the 1.93 per cent Gross Domestic Product (GDP) growth recorded by Nigeria in 2018, as against the 0.82 per cent achieved the previous year, the presidency yesterday beat its chest, saying it is evidence that the President Muhammadu Buhari administration’s economic policy is working.
But analysts have told THISDAY that the outcome only signals the need for increased investments in the country in order to achieve better and sustainable growth.
According to Nigeria’s GDP report for the fourth quarter and full year 2018 released by the National Bureau of Statistics (NBS) yesterday, Nigeria’s Gross Domestic Product (GDP) growth rate increased to 2.38 per cent (year-on- year) in the fourth quarter of 2018 (Q4, 2018).
This indicated a 0.55 percentage rise compared to the 1.81 per cent growth recorded in the preceding quarter.
This also represented an increase of 0.27 per cent when compared to the 2.11 per cent growth rate recorded in the fourth quarter of 2017.
According to the report, on a quarter-on-quarter basis, real GDP growth was 5.31 per cent.
“The fourth quarter growth performance implies that real GDP grew at an annual growth rate of 1.93 per cent in 2018, compared to 0.82 per cent recorded in 2017, an increase of 1.09 per cent points,” the NBS stated.
In Q4, aggregate nominal GDP stood at N35.23 trillion, higher than N31.27 trillion recorded in Q4, 2017, representing a nominal growth rate of 12.65 per cent.
Real GDP growth stood at 19.04 trillion.
However, nominal GDP for the whole of 2018 stood at N127. 76 trillion, representing a nominal growth rate of 12.36 per cent when compared to N113.71 trillion in 2017.
Meanwhile, the Renaissance Capital’s Global Chief Economist, Mr. Charles Robertson, in a note to THISDAY, pointed out that for Nigeria to achieve better long-term growth, ideally oil price would have to rise, saying with high oil prices, Nigeria tends to grow at over five per cent.
In addition, he called for a doubling of investment to GDP in Nigeria, in order to industrialise and effectively diversify the economy.
“A tripling of electricity consumption (not just generation, it has to be distributed too) – is essential for industrialisation and diversification. A more competitive currency – the market rate today is overvalued by about 20 per cent,” Robertson argued.
Comparing Nigeria’s GDP performance to other oil exporters, Robertson stated that the country only did better than Equatorial Guinea, Republic of Congo and Venezuela, but worse than other of its peers.
“Nigeria is probably no longer the biggest economy in Africa – if we use the market exchange rate which averaged 362/$. Note however, we can’t be sure as we don’t have South Africa’s 2018 GDP figures so it’s possible the IMF forecasts for South Africa in 2018 is too high,” he stated.
On his part, the Chief Executive Officer of Cowry Assets Management Limited, Mr. Johnson Chukwu, who spoke on telephone with THISDAY, attributed the impressive performance recorded in the Q4 of 2018 to heightened economic activities due to the yuletide.
“If you look at 2017 also, the last quarter was 2.17 per cent, which was also the highest in that year. So, if you compare the full year GDP of 1.93 per cent with that of other countries at our level of development, most of them are doing more than six per cent. So, I don’t think we have any reason to celebrate a GDP growth rate of 1.93 per cent, especially with our population growth rate of about three per cent,” Chukwu said.
But FXTM’s Global Head of Currency Strategy and Market Research, Mr. Jameel Ahmad, argued that with the stronger Q4 growth, Nigeria could be gaining economic momentum.
“However, with the nation’s fortunes still closely linked to oil markets, growth could be threatened this year if Oil prices continue to depreciate. It will be a monumental week for the Nigerian markets as presidential elections loom,” he added.
Also, Lagos-based CSL Stockbrokers Limited noted that “output from the real sector, which constitutes over 50 per cent to GDP, remains weak due to a myriad of domestic challenges.”
“Insecurity, high interest rate, unstable power are some of the major constraints to full recovery in the real sector. The absence of strong reforms to address these issues suggests they may remain in 2019, making us maintain our forecast for real GDP of 1.5 – 2.0 per cent in 2019,” the firm added.
Continuing, the NBS GDP report showed that on average daily oil production stood at 1.91 million barrels per day (mbpd), lower than the 1.94 mbpd in Q3 2018 as well as 1.95 mbpd recorded in Q4, 2017.
The oil sector contributed 7.06 per cent to real GDP in Q4, down from 9.38 per cent in Q3 and 7.35 per cent in Q4,2017.
For 2018, the contribution of the oil sector to aggregate real GDP was 8.60 per cent, compared to 8.67 per cent in 2017, the NBS further noted.
It stated that the oil sector recorded a negative real GDP growth rate of 1.62 per cent (year-on-year) in Q4 2018, indicating a decline of –12.81 per cent relative to the growth rate recorded in the corresponding quarter of 2017.
On the other hand, the non-oil sector contributed 92.94 per cent to real GDP in Q4, 2018, slightly higher than the 92.65 per cent recorded in Q4 2017.
The non-oil sector grew by 2.70 per cent in real terms within the review period. This is 1.25 per cent higher than the growth rate recorded in Q4 2017, and 0.38 per cent higher than the growth rate recorded in Q3 2018.
On an annual basis, the non-oil sector recorded a growth rate of 2 per cent in 2018, performing considerably better than 0.47 per cent in 2017. For 2018, annual contribution of the non-oil sector was 91.40 per cent compared to 91.33 per cent in 2017.
A breakdown of the sectoral contribution to growth showed that agriculture contributed 26.15 per cent to overall GDP in real terms in Q4, compared to 29.25 per cent in the preceding quarter but slightly higher than the 26.13 per cent recorded in Q4, 2017.
The sector contribution to real GDP in 2018 stood at 25.13 per cent, an increase from 25.08 per cent in 2017.
In real terms, agricultural sector grew by 2.46 per cent (year-on-year), a decrease by –1.78 per cent from the corresponding period of 2017, but an increase of 0.55 per cent compared to the preceding quarter.
It grew at 2.12 per cent in 2018, lower than the 3.45 per cent recorded in 2017.
Manufacturing sector contribution to real GDP in Q4 2018 remained unchanged at 8.86 per cent, same as recorded in its 2017 share and as reflected in the annual contribution, which rose only slightly from 9.18 per cent in 2017 to 9.20 per cent in 2018.
The sector recorded a real GDP growth of 2.35 per cent in Q4, higher than the 1.92 per cent in the preceding quarter and 0.14 per cent recorded in the same quarter of 2017.
Buhari’s Economic Policies Working, Says Presidency
Reacting to the country’s GDP growth, the presidency yesterday said the performance reflected clear indication of the effectiveness of the economic policies of Buhari.
Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu, said with the maintenance of the growth trajectory, the economic diversification objectives of ERGP are set to be realised.
He explained: “It was encouraging that agriculture which accounts for 26.15 per cent of total GDP grew by 2.46 per cent in Q4 2018, while manufacturing grew by 2.09 per cent.
“The service sector which accounts for 53.62 per cent of GDP registered its strongest growth performance in 11 quarters.
“This growth is consistent with the policies and principles of the Economic Recovery and Growth Plan relating to macroeconomic stability and economic diversification.”
In a statement by Senior Special Assistant to the Vice President on Media and Publicity, Mr. Laolu Akande, Dipeolu said further: “Indeed, the economy remains well on course to grow by three per cent in 2019 as estimated in the Medium Term Expenditure Framework.”
Dipeolu added that the Buhari administration will continue to pursue the ERGP diligently, adding that “Nigerians can expect that economic conditions will continue to get better even as we move on to the Next Level.”
On his part, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, expressed delight over the performance of the economy in the fourth quarter of 2018.
The minister was particularly encouraged by the fact that growth was largely driven by the non-oil sector which grew by 2.70 per cent in the quarter, posting a growth of 2 per cent for full year 2018, representing the strongest growth in non-oil GDP since the fourth quarter of 2015.
Udoma, who spoke from Uyo, Akwa Ibom State, yesterday further maintained that the performance reflected the President Buhari-led administration’s continued implementation of targeted policies, programmes and projects across various MDAs and other sectors of the economy as set out in the ERGP.