Prof. Ndubisi Nwokoma is a Professor of Economics and the Director, Centre for Economic Policy and Research, University of Lagos. In this interview on Arise News Channel, he speaks on Nigeria’s latest Gross Domestic Product report released by the National Bureau of Statistics. Excerpts:
How important is the latest GDP figure, what are the realities and what else do we need to do?
I think it is good news in the sense that we are hearing something positive about the Nigerian economy, unlike the negative things we have been hearing in the past. Hearing that the economy recorded about 5.01 per cent growth year-on-year is something that we should celebrate, but we should look at it critically and find out why it was so. I say critically because these are post-COVID-19 recovery effects, period! What is GDP? We are talking about the volume of economic activities. What we seeing is thing there is a pick-up in the level of economic activities. And when you talk about growth rate, you are talking about growth from a base. Remember that the economy shrank by about six per cent during the second quarter of last year.
So, when an economy shrank by six per cent and is recovering by about five per cent, you know that the base has actually been low. So, growth rate is majorly about the increase. Even though it is good to celebrate growth, you need to look at it from that perspective. Secondly, you want to take a look at the growth drivers. One of them is transportation. Last year, people hardly travelled and aviation almost went down. Now, people are travelling and so there is an upsurge in that sector. The issue of whether the GDP we were attaining in the past has been achieved is another issue. But the fact that from a low base we were able to add something that is significant is commendable.
Take a look at services, many people worked from home and ICT has been enabled to enhance work. People can still achieve the level of output they were achieving before, compared with what happened in the year when everything was on lockdown. So, if you take a look at all these, then you would know that we should celebrate, but with a pinch of salt. Again, we take a look at mining. There has been an increase in coal mining and the mining sector generally because of government policy. So, we can say that we need to keep on along this line, but the increase in GDP is critical because the base we are using to determine the growth was low and we should celebrate that something good is happening. Of course, we could have done a lot better because agriculture was low and many people were not going to the farms to work. So, we need to up the game.
I want you to speak more on the stagnancy with respect to crop production which grew slightly by 1.38 per cent?
Yes, just like I said, there is a lingering problem with that sector and there is actually no solution in sight. We are talking about grazing reserves and it has been quite contentious and farmers are still scared to go to farm to produce. Which means that the highest contributor to GDP is actually under threat. And we can see that during the period of farming, when the rains are on, we needed to see significant growth in agriculture, but it is not so and the debate of ranching or no ranching reserve is still there in the public domain.
So, there is still the fear about insecurity and the output of agriculture may not grow as it ought to grow. So, that is an area that the government needs to look at. If we don’t address insecurity, but just keep on going round in circles, we would not be able to bring about the desired growth that this economy is supposed to have. Over the years we have gone into recession and we came out of recession and in the past three quarters, we have been having economic growth, which is beautiful.
But like I said earlier, it was from a low base. When the economy had shrunk and is coming up again, you will expect normally that the growth figures should be high. It is when we now begin to stabilise to where we were before, that you can now say whether the growth is really and what we should celebrate or not. So, agriculture needs to grow more than it did and for it to grow we need to address the issue of insecurity and people can go to farms without fear of being raped, without fear of being killed and without fear of being kidnapped. We should address those issues, because if we don’t, the growth figures we are having now may not be as much as it was next quarter or the quarter after that.
If you look at agriculture, most of its growth came from crop production which I find very curios because we’ve had a lot of crop failure due to insecurity, so what was the statistical modeling and another sub-sector which ought to have spurred growth is the livestock sub-sector, what are the ways to spur growth in the agric sector?
I agree with you entirely. If you look at the contribution of livestock to GDP, you will see that it is quite insignificant. So, why all these cry, confusion and problem about livestock? What is the contribution of livestock to GDP? We need to ask that critical question. The bulk of agriculture contribution to GDP comes from crops. So, why are we so much concerned about livestock in the country? So, I think what government needs to do top jumpstart the economy is to address the insecurity. Even transportation, how many people travel by road today? The bulk of this increase in GDP would come from aviation. Mind you how many people can afford to leave road transportation and go by air? We need to address insecurity so that we can enhance the contribution of other sectors to GDP.
The contribution of transportation went high in the second quarter 2021, compared with what it was previously, but until we address insecurity, the economy would be going up and down. Services is also growing significantly and that was because it was COVID-19 induced growth. People have switched on to be able to render services, using ICT. Internet penetration has gone very high in this country and so people can still achieve increased output despite the lockdown and despite the insecurity. So, I think the critical thing is that we should be happy with the growth we saw in Services, Transportation, Mining sectors. Agriculture grew slightly and there was a depression with the contribution of the Industrial Sector to GDP. Industry isn’t doing well and the other area we should look at very well is the transmission mechanism and how to transmit this growth to other macroeconomic indicators. That is very critical.
Does the growth affect living standards? If the economy has expanded, what is the transmission? Has it been able to transmit to prices? That is very critical. If we don’t look at that, we would just be celebrating the increase in volume in growth. We should see the GDP growth reflecting the people’s living standards. Until that is done, it would just be a growth that is tangible. But overall, it is a good thing to grow. Growth is good for the economy, but another thing is transmission. Comparatively, we did well. It is like somebody who is in a class of 50 and you are like 49th position and tomorrow you improve to the 40th position. That is an improvement, but we still have some ways to go.
But do you think the figure is being magnified and is it a true reflection of the size economy considering the fact that inflation remains very high? But if you answer in the affirmative, then how do we sustain this growth?
Yes, there have questions in some cycles about the quality of data being churned out. In fact, some have even suggested that with the new Director General of the National Bureau of Statistics, are we going to have single-digit inflation rate? In research and data collection, there is a difference between truth and fact. What we have before us are facts which are given to us by an authentic body that is licenced to perform such duties and give us macro-economic data. But people have questioned if these are the true reflection of the Nigerian economy. They might be fact, but are they the truth? If we have a National Bureau of Statistics that can’t be compromised, we would be having data that would be telling us what we want to hear so that we can confront the problems that are facing us. So, if we have inflation that is still very high and GDP is growing, we should not be celebrating yet.
Let us see the transmission and then that will lead to expansion of income and that should also transmit to prices, which is a reduction in inflation. People have questioned those inflation figures, 17 per cent or 18 per cent, but people are saying the increase in prices are more than 50 per cent and some 100 per cent. Even though it is a basket of commodities in calculating inflation, but there is disconnect between what the figures are saying and what is in the market. The figures that are being churned out should help us to address the challenges we are facing and not that there is problem and then we now say something that is palatable to us and to our leaders and everybody would have a false sense of wellbeing.
But for now, it is not yet uhuru for the Nigerian economy. We need to celebrate this, but cautiously because there is a lot of work to be done. Like I said earlier, one earlier thing that needs to be done is to address the issue of insecurity. There are other problems in the economy, but one singular thing they can do is to tackle insecurity because there is also capital flight. If you address that, every other sector would begin to pick up and then the growth figure would be something we would all definitely be happy with. I think government should do the needful and then things would be better.
What other low hanging fruits can you point at to stimulate growth?
Government needs to actually address the issue of availability of foreign exchange, which is very critical to grow manufacturing. The normal trajectory for economic growth in any economy is that from agriculture you transit to industry and then services. China, for example, grew by enhancing industrialisation; India grew by enhancing services. Now, compare India with China in terms of the trajectory of their economic growth. China was able to take over 500 million people out of poverty by taking the route of industrialisation. But India, they say is the software capital of the world. We are taking the path of India, which is not the path we should take. We need to enhance industrialisation. We need to do that because that sector is shrinking. Currently, they are facing the challenge of getting foreign exchange for their inputs. So, we need to focus on industrialisation because it shrank in this report. We need to transit from agriculture, to manufacturing and then to services.
But even when the GDP was rebased under President Jonathan, we had a very large services sector of over 50 per cent. But we are jumping the middle, which is manufacturing by moving from agriculture to services. We need to change that trajectory by moving from agriculture, to manufacturing and then to services. That would enhance inclusive growth. So, we need to address industrialisation. If we don’t do that and we say we are growing through services by jumping the middle, which is manufacturing, the growth cannot be sustained for a long time and it cannot be inclusive. That is because many people are involved in the first stage which is agriculture and the second stage which isindustrialisation. So, if the middle is weak, the economy will not have a strong foundation. So, we need to address that problem of manufacturing. There is scarcity of foreign exchange, there is no infrastructure, there is no security for them, they provide their own water, provide their own power and are involved in road construction. With all these, the factory cost of what they provide will be high.
So, how can we spur the growth of manufacturing vis-à-vis the AfCFTA?
I think as things stand now, Nigeria would not benefit maximally from the AfCFTA. I happen to have done some work for the African Union in that regards and I discovered that the way Nigeria is structured now, of which Nigeria part of, the benefits of the AfCFTA would be for countries that have goods to sell, particularly in the area of agriculture. So, the value you add to your basic commodity will be your cutting edge. Nigeria does not have what it takes to compete on the continent currently because we don’t have a functional manufacturing sector where we need to add value. Many times, what we do is that we re-export. That is, we import from Europe or China and we send to Congo.
These are re-export because the origin of those goods are not from your country. That is, from another country, you export into Nigeria and then you ship to another country and put a premium on your price. For us to benefit, we need to take a look at the operating environment in Nigeria. Look at roads, how many roads in Nigeria are in good condition? Even the Lagos-Ibadan expressway, how many years have we been doing that road? Can we have a factory in Ibadan that can be supplying goods to Lagos? What is the cost of moving cargo from Apapa to Onitsha? In fact, somebody alleged that it cost more to move your goods from Apapa to Kwara or Ibadan, more to import the goods from China.
So, these are issues of logistics and dislocation within the economy. If we are bringing in raw materials as such a high cost, then how can you produce at a cost that you can compete with somebody in Niger Republic or somebody in Cameroun? So, these are issues we need to address in enhancing manufacturing. And that is our basic selling point to be able to compete in the continent. So, we need to address the middle as I stated earlier.
