Obinna Chima in Lagos and James Emejo in Abuja
Analysts yesterday called on the federal government to initiate policies to stimulate private sector investment as a step towards growing the economy.
The analysts, speaking to THISDAY in reactions to the release yesterday of new data on the country’s Gross Domestic Product (GDP), which grew by 1.87 per cent (year-on-year) in real terms in the first quarter of 2020 (Q1 2020), gave tips on other measures the government should take to reposition the economy to overcome the challenges caused by the COVID-19 pandemic.
The Nigerian Gross Domestic Product Report – Q1 2020, released by the National Bureau of Statistics (NBS), however, showed that the performance represented a contraction by 0.68 per cent compared to the 2.55 per cent growth rate recorded in the fourth quarter (Q4) 2019.
The slump in GDP growth reflected the earliest effects of economic disruption, particularly on the non-oil economy.
Similarly, the latest GDP figure further indicated a contraction by 0.23 per cent, when compared to 2.10 per cent growth, recorded Q1 2019.
The Q1 GDP result came against the backdrop of significant global disruptions resulting from the COVID-19 pandemic, a sharp fall in oil prices and restricted international trade, the NBS noted.
According to the NBS, in the quarter under review, aggregate GDP stood at N35.64 trillion in nominal terms compared to N31.82 trillion in the first quarter of 2019, with a nominal growth rate of 12.01 per cent year-on-year. Real GDP stood at N16.74 trillion.
The Nigerian economy grew by 2.27 per cent at full year in 2019 compared to 1.91 per cent in 2018, according to the statistical agency.
Relative to the first quarter of 2019, the nominal growth rate was higher by 0.11 per cent, but lower than the preceding quarter by –0.32 per cent.
However, quarter-on-quarter, real GDP growth was –14.27 per cent compared to 5.59 per cent recorded in the preceding quarter.
The Q1 performance was dominated by the non-oil sector, which grew by 1.55 per cent and accounted for 90.50 per cent of growth. This was, however, lower than the 92.68 per cent recorded in the preceding quarter, while the oil sector which grew by 5.06 per cent, contributed 9.50 per cent to GDP, up from 7.32 per cent in Q4.
The average daily oil production peaked at 2.07 million barrels per day (mbpd) in Q1, higher than the 2mbpd recorded in Q4 by 0.06mbpd- and also higher than 1.99mbpd recorded in the same quarter of 2019 by 0.08mbpd.
However, agriculture contributed 21.96 per cent to growth while industries accounted for 23.65 per cent as well as the services sector that accounted for 54.39 per cent.
The manufacturing sector’s contribution to GDP in Q1 stood at 9.65 per cent, lower than the 9.79 per cent recorded in Q1 2019 but higher than the 8.74 per cent recorded in Q4 2019.
Speaking in separate interviews with THISDAY, analysts advised the federal government to focus more on developing the real sector, particularly agriculture to cope with the growing impact of the COVID-19 pandemic, which was largely responsible for the contraction in the growth of the economy in the first quarter of the year.
The Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said there was an urgent need for an ideological shift in the country.
“The main variable that can take this economy out of this current problem is investment. Until you do something that would make investors, both domestic and international, to have confidence in this economy, then we are not going anywhere.
“I am not convinced at this point in time that the emphasis on investment as a catalyst for growth has been appreciated. That is my personal view. Investment will not happen during a pandemic because investors by nature are overly cautious at that time, but you have to plan and make it your objective.
“The major determinant is that an investor should be able to get value out when he comes in. Therefore, the exchange rate management mechanism has to be clear,” Rewane, who is a member of President Muhammadu Buhari’s Economic Advisory Council, said.
The Co-founder, CardinalStone Partners Limited, Mr. Mohammed Garuba, said there was a need for the federal government to encourage private sector investment as the government alone cannot address the country’s challenges.
He said: “Government doesn’t even have the resources. That is why the government has to create an enabling environment to allow the private sector to thrive so as to stimulate growth. And we are seeing a bit of that. Last year’s budget and this year’s budget, the government planned to build certain roads, but they are not using their money. Instead, they are partnering with some companies like Dangote to build those roads and the government would write-off some of his debts. Those are the kinds of partnerships we need. So, it is about creating an enabling environment.”
On his part, Prof. Uche Uwaleke of the Nasarawa State University, who commended the Central Bank of Nigeria’s (CBN) intervention in agriculture, especially the Anchor Borrower Scheme (ABP), added that it has helped to grow the sector.
“It is time to expand and scale up the interventions to cover more products and states of the federation.
“The IMF has projected that the Nigerian economy will sink by 3.4 per cent this year. In order to reduce the size of the economic recession below forecast global average of three per cent, it is important that the COVID-19 stimulus packages both by the government and the CBN are well-targeted and executed in ways that will protect jobs and speedily reverse the present downturn in economic activities.
“This is the more reason much attention should be shifted to the non-oil sector, especially agriculture, health, education and the enabling infrastructure such as power, roads, and ICT.
“Mechanised farming will go a long way in boosting food production. Doing so will bring down food inflation which was over 15 per cent as of April according to the NBS,” he said.
He said the performance of the economy in Q1 should not come as a surprise as the negative impact of COVID-19 on the economy, the supply chain disruptions, the associated public health crisis and the collapse in oil price had negatively impacted on growth.
Associate Professor of Agricultural Economics at the University of Port Harcourt, Dr. Anthony Onoja, described the economic performance as worrisome even though it was expected.
He told THISDAY that with the historic low capacity utilisation in the real sectors, which appeared not to be improving as infection rates of the COVID-19 pandemic had not yet flattened, it becomes inevitable to face the reality of living with and fighting another recession in the economy again.
He said: “The government will need to stimulate the economy by providing support to the real sectors in the form of loans or tax holidays. Efforts should be made to support the agriculture sector and other non-oil sectors so as to diversify the economy.”
According to him, loans should be used where necessary to boost capacities of small and medium enterprises and also to help pay salaries of workers as it can stimulate aggregate demand and boost employment.
He said enabling environment for businesses to thrive should be created by developing good health infrastructure, electricity, and support to research and development in the country.
Onoja added: “This is an ominous sign that the much-dreaded recession is here with us again. A recession is a general downturn in an economy. A recession is usually associated with high unemployment, slowing gross domestic product, high inflation, and interest rate.”