The nation’s economy plunged into recession early 2016. But with the preceding Gross Domestic Product, GDP figures, it is discernible that real progress has been achieved and that the economy has improved. From a growth rate of 2.79% in 2015, the GDP crashed to a growth rate of -1.58% in 2016 due to the recession. Full Year 2018 saw the country’s GDP grew by 1.93% from the 0.82% attained at the end of 2017, representing a 1.1% growth in the economy, writes Mande Abubakar, and Chales Okonji.
As the year 2015 drew to a close, there were already bold hints that the Nigerian economy was heading towards choppy waters. The price of oil, the country’s biggest revenue source, had slid on the international market, leaving government at all tiers gasping. Many state governments were, so to speak, in intensive care units, as they could no longer pay staff salaries let alone carry out developmental initiatives.
This was hardly the most hospitable condition for a new government. President Muhammadu Buhari, who took office in May of that year, found that his promise to reform the economy and boost infrastructural development, as contained in the “Change” manifesto of his government, faced a mile-high odd. The nation’s coffers were virtually bare; inflation had climbed to 9.6% by in December 2015, according to the National Bureau of Statistics (NBS).
The following year arrived with what was a vicious blow to the new administration and, of course, Nigerians. The price of oil on the international market slid below the $50 per barrel benchmark. This had the none-too-surprising effect of ripping up the government’s plans and expenditure for capital projects and social security programmes. The country lost its titular designation as “Africa biggest economy” to South Africa.
Worse was to come. The NBS announced that the economy contracted by 2.06% between April and June 2016. The implication was that Nigeria, technically, had slipped into recession.
Despite having attained a 10-year record high Gross Domestic Product (GDP) growth rate of 6.22% in 2014, the country’s economy, in a space of two years, had shrunk alarmingly. The situation provided ammunition for the critics of the administration, which was condemned to find a way out of the economic difficulty the country was mired in.
The response was to initiate policies that would bring about resuscitation. These took the form of several business policies and executive orders, notably the Executive Order One (EO1) Ease of Doing Business. These have sparked a slow but steady growth in the country’s GDP, which measures the monetary value of final goods and services produced in a country in a given period of time.
The country exited recession by the second quarter of 2017 and bounced back stronger. The economy’s improvement has been validated by the recent figures released by the NBS on the country’s GDP, the most reliable gauge of a country’s overall economic activity.
The NBS report entitled, Nigerian Gross Domestic Product Report: Q4 and Full Year 2018, noted that the country’s GDP grew by 1.93% in 2018 from the 0.82% attained at the end of 2017, representing a 1.1% growth in the economy. The GDP growth rate of 2018 rhymed with the projection of the Bretton Wood Institutions, the World Bank and International Monetary Fund, which had tipped the GDP to grow by 1.9 per cent in 2018.
A further evaluation of the report reveals that the country’s GDP grew by 2.38% in real terms (year-on-year) in the fourth quarter. This represents an increase of 0.27% when compared to the fourth quarter of 2017, which recorded a growth rate of 2.11%. It also indicates a rise of 0.55% when compared with the growth rate of 1.81% recorded in Q3 2018. The real GDP growth on a quarter on quarter basis for the year 2018 was 5.31%.
Taking a holistic look at the GDP figures for the past four years, it is discernible that real progress has been achieved and that the economy has improved. From a growth rate of 2.79% in 2015, the GDP crashed to a growth rate of -1.58% in 2016 due to the recession.
The nominal GDP for the year 2018 was N127,762, 545.58 million, representing a nominal growth rate of 12.36% when compared to N113,711,634.61million recorded in the year 2017.
Also, upon assumption of office, President Buhari promised Nigerians that his administration will work relentlessly to ensure that the country greatly reduces its overdependence on oil. Just under four years, the path towards less dependence seems to be much clearer and resolute. The non-oil sector growth rate was at 3.75% in 2015, but sharply declined in 2016 to -0.22%, partly due to the recession which affected all economic sectors. A bounce occurred in 2017 when it grew by 0.4% and even considerably improved in 2018 when it recorded a growth of 2%.
Looking at the opposite side of the divide, it has really been a turbulent four-year period for the oil sector. The dwindling prices of oil had a catastrophic effect on the Nigerian economy as its proceeds form a huge bulk of the country’s revenue. In 2015, the sector’s growth rate contracted at -5.45% and shrunk further to -13.65% in 2016. But the Buhari administration’s policies rectified the anomaly, with the oil sector recording a 4.69% growth in 2017, before it declined to 1.14% in 2018.
In terms of the individual sectors, there has also been a consistent growth rate in sectors such as agriculture, industry and service.
Agriculture, particularly, has been a fulcrum of the Buhari administration’s economic reform agenda, which aims for self-sufficiency in food production. Analysis of its GDP growth rate shows that agriculture grew by 3.7% rate in 2015, rose to 4.11% in 2016 before declining to 3.43% and 2.12% in 2017 and 2018 respectively.
For the industry sector, which includes manufacturing, construction, mining and quarrying, and information and communication, there was contraction to -2.24% in 2015, and -8.85 percent in 2016. It, however, recorded a 2.15% growth in 2017 before sliding to 1.94% in 2018.
The service sector, which consists of transportation and storage, arts and recreation, financial and insurance, administrative and support services among others, recorded a 4.78% growth in 2015, but contracted in 2016 and 2017 to -0.82% and 0.91% respectively. A better output for the industry occurred in 2018, as it recorded a growth of 1.83%.
A summary of the statistical indices as highlighted above shows that the country’s economic profile has improved, even after suffering the debilitating recession.
The economy has not only recovered, but moving towards a more sustainable level of assurance for all Nigerians. Such progression can only continue if more astute policies are well-conceived and implemented without any iota of corruption and with financial prudence as the Buhari administration is currently doing.
SMEs critical to sustain growth
The Small and Medium scale Industries (SMIs) are very critical to the growth of the manufacturing sector in particular, and the sustenance of the recorded growth in the economy in general. This according to Manufacturers Association of Nigeria (MAN) is because the more successful they are, the more the larger industries can rely on them to do a lot of the things that they themselves are having to do. This way the value chain will be stronger and will help both the larger and the smaller industries, stated the President of MAN, Engr Ahmed Mansur.
We will continue to advocate for initiatives that will put more funds in the hands of the Small and Medium industries at lower cost or lower interest rate and on a longer-term basis because investments in manufacturing is on a long-term basis. So long term funding is important. It is indeed lack of long-term funding that also tends to keep our industries small and at tertiary levels.
Today, the manufacturing sector is contributing less than 9% of the Nation’s Gross Domestic Products (GDP). It is not good enough. In countries that are not as developed as Nigeria, we have seen higher rates of contribution by the manufacturing sector to such country’s GDP. For any country to be considered as industrialized, the manufacturing sector being the productive sector that produces the goods that generate value and create wealth, must be contributing significantly to the growth of the economy.
In countries such as Malaysia, Indonesia, Brazil, South Africa, the manufacturing sector contributes in the range of 30% to their countries GDP. Ironically, Nigeria is contributing less than 9%. It obvious that manufacturing has a long way to go with regards to raising the level of contribution of the sector to the GDP.
The MAN President noted; ”Under my administration, members should expect expansion of the sectors i.e. bringing more manufacturers into the fold and ensuring that sectoral groups are made vibrant. We have about ten sectoral groups, but if you look at the relative contributions you will observe that not more than 4 or 5 sectoral groups are responsible for most of the contribution of the manufacturing sector to the economy and for most of the employment as well. The textile sector used to be very vibrant, but it has declined significantly. So, we must broaden the sector to ensure that sectors that are not adequately functioning are restored to good health. In leather and footwear there is tremendous capacity but today it is not being fully exploited, we are stopping at the production of wet leather.
“Value addition is the key to success in manufacturing, for instance, if you take the process from hide to finished leather and compare the value that is added from that finished leather to a pair of women’s handbags, the difference is huge. Hence, there is need to deepen the sectors. The same scenario is applicable to food processing; you produce cocoa, turn it into cocoa butter and you export it, what you get from that cocoa butter and they convert it into chocolates, for the same quantity of cocoa butter the manufacturers of chocolate will make literally a thousand times more than we do in Nigeria.
“It is not out of place to say that as a result of the collapse of the oil price the country went into recession, and although we are out of recession, but the economy is still fragile. The manufacturing sector is still unstable. But we are beginning to see at least in terms of current government decisions possibilities that can help the manufacturing sector to grow but the execution of these policies is very important. As stakeholders, we will continue to monitor this and raise alarm if need be, when things are not being executed when they should. I believe that the position in a nutshell is that the manufacturing sector is too fragile, and a lot more needs to be done to strengthen it and sustain its growth trajectory.
“We need to ensure that policies are in place that will help to create friendlier and more conducive business environment. We need to work with the government to ensure that continued investment in infrastructure is being made in order to reduce the cost of doing business and improve the productivity of the businesses themselves. We need to work with the government to ensure that overall business environment is being monitored in a way that we don’t fall back into recession. More concerted effort being made to strengthen agriculture so that we diversify the economy away from oil.”