•Oil production drops to 1.98 mbpd
Obinna Chima in Lagos and James Emejo in Abuja
Economic analysts and stakeholders expressed concerns yesterday as the country’s Gross Domestic Product (GDP) growth rate dropped to 1.94 per cent (year on year) in real terms in the second quarter of the year (Q2 2019), compared to the 2.10 per cent (revised from 2.01 per cent) in the preceding quarter.
They urged the federal government to urgently evolve practical strategies to stimulate growth in key sectors of the economy.
According to the GDP Report for Q2 2019, which was released yesterday by the National Bureau of Statistics (NBS), the Q2 estimate represented –0.16 percentage point contraction of the economy.
However, compared to the corresponding quarter of 2018 (Q2 2018), which recorded a growth of 1.50 per cent, the growth observed in Q2 2019 indicated an increase of 0.44 per percentage points.
Meanwhile, the country recorded average daily oil production of 1.98 million barrels per day (mbpd), which is slightly less than the 1.99mbpd (revised from 1.96 mbpd) in Q1 and 7.6 per cent higher than the 1.84 mbpd recorded in the same quarter of 2018.
While the oil GDP accounted for 8.82 per cent of growth, the non-oil sector contributed 91.18 per cent to GDP.
Daily oil production also dropped to 1.98 million barrels per day (mbpd) compared to 1.99 mbpd in the preceding quarter.
Aggregate GDP in nominal terms was valued at N34.944 trillion, an increase of 9.8 per cent over the N31.79 trillion in preceding quarter and 13.83 per cent over the performance in Q2 2018. Real GDP was estimated at N16.90 trillion.
The NBS explained that on a half year basis, real growth in the first half of 2019 stood at 2.02 per cent, higher than in 2018, which was 1.69 per cent.
However, quarter on quarter, real GDP increased by 2.85 per cent compared to a decline of –13.69 per cent in the preceding period, the statistical body further noted.
It stated that a total of 15 activities grew faster in Q2 2019 relative to last year, while 13 activities had higher growth rates relative to the preceding quarter.
It added that the performance observed in Q2 followed an equally strong Q1 performance, and was likely aided by stability in oil output as well as the successful political transition.
The oil sector posted a real growth rate of 5.15 per cent (year-on-year) in the quarter under review, representing a 9.10 percentage increase relative to the rate recorded in the corresponding quarter of 2018.
The sector, however, contributed 8.82 per cent to total real GDP in Q2 compared to 9.22 per cent in Q1.
Growth was largely aided by the non-oil sector, which grew by 1.64 per cent in real terms during the reference quarter.
In real terms, the sector contributed 91.18 per cent to GDP, which was higher than the 90.78 per cent posted in the preceding quarter.
Agriculture, industries and services sectors contributed 22.82 per cent, 23.21 per cent and 53.96 per cent to real GDP in the quarter under review.
While trade contributed 16.10 per cent to growth, finance and insurance accounted for 3.18 per cent share of GDP.
Reacting to the GDP report, analysts who spoke in separate interviews with THISDAY, stressed the need to increase lending to individuals and businesses in the country, so as to stimulate economic activities.
Commenting on the performance of the economy, economist and former Director General, Abuja Chamber of Commerce and Industry (ACCI), Dr. Chijioke Ekechukwu, said the weak growth represented a warning signal for the country to evolve urgent measures to stimulate growth.
“It is a warning signal. We need to get our fundamentals right again. It is an indication that different sectors are dropping in their business activities,” he said, adding: “Some portfolio investors exited the country to where their returns will be higher and that has been happening since last year.”
He said insecurity in the country was also responsible for the drop in Direct Foreign Investments and in the drop of agricultural output and explained that there was need to stimulate the economy by making funds available to all sectors at little or no cost.
Similarly, Chief Executive, Global Analytics Company, Mr. Tope Fasua, said the performance indicated among other things that the economy is yet to be diversified.
According to him: “Even the presidency has acknowledged that we may be close to a fiscal crisis. Mr. Garba Shehu, the presidential spokesman said just that days ago. We know that crude oil has been trading at below the $60 benchmark for weeks now.”
He said what the second quarter result showed was that the economy was yet to be diversified and that productivity and capacity utilisation was very low.
“What is more? Nigeria is not ambitious with its growth or future,” he said, and added: “Indians are complaining that their GDP growth rate fell to 5 per cent from 8 per cent in the last quarter. That is a $2.5 trillion economy pushing to grow faster.”
China, he said, was awfully worried that growth slipped from 10% to 6.5 per cent, protesting that when critics in Nigeria we speak of a double-digit growth, indoctrinated dogmatists would say the country was not ripe for it.
“We wait for the IMF to tell us we couldn’t do better than 2 per cent. It is a great tragedy. But it seems it will get worse, much worse, before it gets better,” Fasua said.
The Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, pointed out that typically, second quarters were usually known for slowdown in economic activities.
He, however, noted that the sectors that slowed, such as agriculture which employs 25 per cent of the workforce in Nigeria and construction as well as those that contracted, which included wholesale, trade, manufacturing and real estate, were those that employ a lot of people in the economy.
Rewane said: “This is a black eye and we need to do a lot more. It was quite clear that the sectors that had intervention funds have not responded.”
According to him, the way out is to allow for an increase in lending, increase in economic activities and a reduction in interest rate.
However, he noted that the second quarter was the period in which the country had no cabinet and as such there was more uncertainty, which he reasoned people responded to.
He explained: “So, it was a spill over of the first quarter; You can run, but you can’t hide. The reality is that without fear of contradiction, unemployment rate might go higher than 30 per cent when the data is released by the NBS.
“So, we are at the tipping point, especially when population is now at 2.7 per cent and our GDP growth is 1.94 per cent. The gap between potential GDP and real GDP is widening. Therefore, your recessionary gap is increasing. So, we have some difficult days ahead and there is no mistake about that.”
On his part, the Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chukwu, called for appropriate policy mix for the sectors that either slowed down or contracted in the GDP report.
He said: “This is a report card of the economy, which basically shows how effective government policies have been. So, we need to look at those activities that would spur growth in the manufacturing sector.
“I think one fundamental thing that we must understand is that consumption level is low, so we need to stimulate consumption. This is because without consumption, there won’t be manufacturing
“So, the demand level in the economy is very weak, which is why a lot of Nigerians are worried. One of the ways to stimulate consumption at a time like this is through public works. Unfortunately, government is not in a position to fund public works.
“So, the appropriate way to respond is to come up with public-private partnership initiative to attract private capital, so as to restore consumption.”
Chukwu, said there was need to review the power sector privatisation and see how to make it more effective.
In his contribution, the National President, Chartered Institute of Bankers of Nigeria (CIBN), Mr. Uche Olowu, attributed the development, especially the slowdown in agriculture GDP to the insecurity challenges.
He said: “The security issues in the agriculture sector was a major factor, so this was expected. So, government has to address the challenge of insecurity to allow for free movement of persons from one place to the other, to enable free flow of goods and services, so as to spur economic activities.
“Secondly, you know the Central Bank of Nigeria has just increased the loan-to-deposit ratio and the federal government is reducing domestic borrowing, to free up liquidity for the real sector.
“That is expected to spur economic activities and there should be basic alignment of the fiscal and monetary authorities, to create additional incentives to rejuvenate economic activities.”