Over the years, successive Nigerian governments have preached the gospel of economic diversification, but none has really worked hard to match words with action as the country continues to heavily depend on oil for its revenue; BENJAMIN UMUTEME reports.
As Nigerians were relaxed in their homes taking stock of Sunday’s activities, the news broke that the National Bureau of Statistics (NBS), released the Gross Domestic Product report for the first quarter 2021.
According to the statistics bureau in the report, Nigeria’s Gross Domestic Product (GDP) grew by 0.51% (year-on-year) in real terms in the first quarter of 2021, marking two consecutive quarters of growth following the negative growth rates recorded in the second and third quarters of 2020.
The NBS stated that the Q1 2021 growth rate was slower than the 1.87 per cent growth rate recorded in Q1 2020 but higher than 0.11 per cent recorded in Q4 2020, indicative of a slow, but continuous recovery.
Nevertheless, quarter on quarter, real GDP grew at -13.93 per cent in Q1 2021 compared to Q4 2020, reflecting a generally slower pace of economic activities at the start of the year.
Oil sector
The report stated that the oil sector recorded a real GDP growth rate of –2.21 per cent (year-on-year) in Q1 2021 indicating a decrease of –7.27 per cent points relative to the growth rate recorded in the corresponding quarter of 2020 (5.06%). Compared to Q4 2020 which recorded –19.76% growth rate, growth in Q1 2021 was higher by 17.55% points. Quarter-on-quarter, the oil sector recorded a growth rate of 35.65 per cent in Q1 2021. In terms of contribution to aggregate GDP, the Oil sector accounted for 9.25 per cent of aggregate real GDP in Q1 2021, slightly lower than 9.5 per cent recorded in the corresponding period of 2020 but higher than in the preceding quarter, where it contributed 5.87 per cent. Analysts opine that the increase was largely due to the steady rise in the prices of crude oil.
Non-oil sector
Meanwhile, the non-oil sector grew by 0.79% in real terms in Q1 2021, which was –0.75% points lower compared to the rate recorded in the same quarter of 2020 and -0.89% points lower than rates recorded in the fourth quarter of 2020. Growth in the non-oil sector was driven mainly by the Information and Communication (Telecommunication) sector while other drivers include Agriculture (Crop Production); Manufacturing (Food, Beverage & Tobacco); Real Estate; Construction and Human Health & Social Services.
In real terms, the Non-oil sector accounted for 90.75% of aggregate GDP in the first quarter of 2021, higher than its share in the first quarter of 2020 which was 90.50%, but lower than 94.13% recorded in the fourth quarter of 2020. Agriculture grew at 2.28% y/y in Q1 2021, which is close to its trend growth rate, but lower than the 3.42% y/y recorded in Q4 2020. Trade contracted at 2.43% y/y in Q1 2021, but this is better than the 3.20% y/y/ contraction in Q4 2020. Telecoms grew at 7.69% y/y in Q1 2021, but this was much lower than the 17.64% y/y growth in Q4 2020. Manufacturing grew at 3.40% y/y in Q1 2021 which is much better than the 1.51% contraction in Q4 2020. Real Estate grew at 1.77% which is not quite as good at the 2.81% y/y growth recorded in Q4 2020. In spite of the little ray of light in this sector, experts say it is almost certain to be seen as disappointing.
Experts’ views
For the president, Association of Capital Market Academics of Nigeria (ACMAN), Prof. Uche Uwaleke, the Q1 2021 GDP report reflects an economy already on the path of gradual economic recovery with a positive real GDP growth rate following that recorded in the previous quarter.
Uwaleke, told Blueprint Weekend that at 0.51 per cent, the country’s GDP was still weak.
He said, “It is interesting to note that the manufacturing sector is now out of the negative territory increasing from -1.51% to 3.40%. Equally noteworthy is the moderation in the negative performance in sectors like trade, accommodation and education.
“The increase recorded in the Health sector from 3.05% in Q4 of 2020 to 4.65% clearly shows that the country is winning the war against the Covid-19 pandemic.
“It is clear that the improved performance in the oil sector relative to the previous quarter was largely on account of improvement in average crude oil production.”
Similarly, MD/CEO SD&D Capital Management Limited, Idakolo Gabriel Gbolade, in a chat with this reporter, attributed the slight decline to the implementation of stimulus packages by the federal government. He, however, pointed out that the issue of insecurity is also taking its toll on the economy.
“The Q1 GDP showed a slight decline compared to Q4 2020, basically because the federal government has started implementing the stimulus package for the economy but the major problems of insecurity, inflation and economic challenges due to the federal government’s economic policies still persist.
“These issues need to be tackled headlong if we want this improvement to continue. There are lingering crises of labour issues in some states, with the demand by CBN for states to start repayment of the loans availed to them coupled with dwindling revenue sharing by the three arms of government which has necessitated increased borrowing to fund government activities,” he said.
For political economist & development researcher, Adefolarin Olamilekan, the news of 0.75 per cent growth of the non oil sector in the first quarter of 2021 should excite Nigerians.
According to him, “It is an eye opener that the non-oil sector remains the bedrock to unlock Nigeria’s potential for sustainable economic development. However, the bane of our economic development in Nigeria is the insensitive and poverty of governance urgency to diversify the economy from the petro-dollar rent revenue generation to a more robust, productive, attractive, good incentive, revenue booster and employment generation economy.”
Disturbing reports
Uwaleke, a professor of the Capital Market, told this reporter that the report is disturbing as it revealed the decline recorded in critical sectors of the economy.
“But the report also reveals a disturbing pattern in the real GDP growth rate. Declines were recorded in critical sectors of the economy such as agriculture, ICT, real estate and transportation. This may not be unconnected with the rising insecurity in the country.
“That the non-oil sector dropped should be of concern to both the fiscal and monetary authorities.”
Growing non-oil sector
For Idakolo, it’s a wake-up call that dependence on oil revenue is going out of fashion.
He said, “The more we look at strategically growing our non- oil revenue the better for us as a country. From the GDP Q1 2021 data, it shows that if more effort is channelled towards non-oil revenue we will be able to get maximum returns.
“The country needs to start shifting to renewable energy in line with global aspirations and strive to reduce dependence on oil so that we will not be left behind as the train of renewable energy is moving fast. Nigeria presently is facing decline in oil revenues and the more reason why we should develop capability in renewable energy.”
Olamilekan sees it a little bit differently. According to him, it is a wake-up call for citizens to mount pressure on the government to do the needful.
“As the ominous signs of unsustainability or relying on the crude oil dollar to maintain our economy desires evidently abound with us.
“The revenue challenge we are currently facing can be overcome if managers of the Nigerian state seize the opportunity afford us by the non oil sector. Furthermore, the principal practical solution that flows from economy diversification must go beyond policy statement and rhetoric coming from conference and summit. At the same time it is important and a requirement that economy diversification must be all inclusive. So, it stands to a reason that the national assembly and state houses of assembly task themselves on this imperative national economy agenda.”
