When Nigeria’s Gross Domestic Product (GDP) for the second quarter of 2021 was released by the National Bureau of Statistics (NBS) indicating the economy recorded 5.01 per cent growth year-on-year, many were surprised as nothing much had changed between the first and second quarter. A closer look reveals the statistics bureau was telling the truth in an ingenious way; BENJAMIN UMUTEME reports.
Since the release of the second quarter Gross Domestic Product (GDP) report by the National Bureau of Statistics (NBS), reactions have been pouring in from all quarters, both experts and laymen.
Not many GDP reports have generated this much scepticism as many are of the view that with the present situation Nigerians are passing through, it was impossible to record such growth.
Q2 2021 report
The report indicated that Nigeria’s GDP increased by 5.01 per cent in the second quarter of 2021, strongest growth since fourth quarter 2014.
This is according to the second-quarter GDP report released by the National Bureau of Statistics (NBS) on Thursday.
The report also marked three consecutive quarters of growth following the negative growth rates recorded in the second and third quarters of 2020.
“Nigeria’s GDP grew by 5.01 per cent (year-on-year) in real terms in the second quarter of 2021, marking three consecutive quarters of growth following the negative growth rates recorded in the second and third quarters of 2020,” the report read.
“The Q2 2021 growth rate was higher than the -6.10 per cent growth rate recorded in Q2 2020 and the 0.51 per cent recorded in Q1 2021 year on year, indicating the return of business and economic activity near levels seen prior to the nationwide implementation of COVID-19 related restrictions.
“The steady recovery observed since the end of 2020, with the gradual return of commercial activity as well as local and international travel, accounted for the significant increase in growth performance relative to the second quarter of 2020 when nationwide restrictions took effect.”
Year to date, real GDP grew 2.70 per cent in 2021 compared to -2.18 per cent for the first half of 2020.
Nevertheless, quarter on quarter, real GDP grew at -0.79 per cent in Q2 2021 compared to Q1 2021, reflecting slightly slower economic activity than the preceding quarter due largely to seasonality.
In the second quarter of 2021, average daily oil production stood at 1.61 million barrels per day (mbpd), which is -0.19mbpd lower than the average daily production of 1.81mbpd recorded in the same quarter of 2020 and -0.10mbpd lower than the 1.72mbpd recorded in the first quarter of 2021.
Real growth of the oil sector was –12.65 per cent (year-on-year) in Q2 2021 indicating a decrease of –6.02 per cent points relative to the growth rate recorded in the corresponding quarter of 2020.
“Performance in the non-oil sector grew by 6.74 per cent in real terms during the reference quarter (Q2 2021). The Q2 2021 growth rate was higher by 12.80 per cent points compared to the rate recorded in the same quarter of 2020 and 5.95 per cent points higher than the first quarter of 2021,” the report added.
“During the quarter, the non-oil sector was driven mainly by growth in trade, information and communication (Telecommunication), transportation (Road Transport), electricity, agriculture (Crop Production) and manufacturing (Food, Beverage & Tobacco), reflecting the easing of movement, business and economic activity across the country relative to the same period a year earlier.”
Devil in the details
It is interesting to note that more people have been analysing the Q2 2021 report, and one thing is obvious: the devil is in the details.
For financial analysts, Sanya Adejokun, the NBS headlining the Q2, 2020 GDP report with 5 per cent growth was a trap that worked. According to him, report worked well for both propaganda and reality depending on who wants to use it.
He said: “When we compare second quarter of 2020, when the country was in absolute lockdown and second quarter 2021 when life was in full bloom, it would be seen that the 5 per cent growth reported for the period is real and should not surprise anybody. It should rather be alarmingly small!
“Nonetheless, it happened and it is a reality even though it is a deceptive comparison in the face of practicality. It is a boost for government propaganda purposes.
However, when we now become serious and look at sections of the report for first quarter of 2021 when growth was 0.5 per cent and second quarter of 2021 (the immediate next quarter) when growth plummeted to -0.7 per cent, then, we will realise that there is danger.
“Agriculture is a significant percentage of our GDP and if farmers were not able to access their farms because of widespread insecurity, where then will the unprecedented growth emanate from?
“Don’t also forget that the telecom sector lost tens of millions of subscribers during the period as a result of suspension of SIM card sales. 5 per cent growth would have resulted in a quantum leap in employment creation. Do we have such evidence,” he asked.
For Vice President, CITITRUST ADVISORY Limited, Adebayo Odeyemi, growth is a function of where you start from.
Speaking to Blueprint Weekend, Odeyemi noted that when compared with last year when the economy was shutdown it actually recorded growth.
According to him, using that as a base will always show the economy expected growth, however, “if you move back again, it may give you a different picture altogether,” he added.
“Last year, that was the middle of the pandemic, the economy was shutdown and you are using that particular base, haba!
“If you are using that particular base, the economy has opened, it would appear you are doing well, he stressed.
Putting a perspective to the debate, a Professor of Capital Market at the Nasarawa State University Keffi, Uche Uwaleke, noted that comparisons using different base values will always produce varying results.
Aligning with Odeyemi, Uwaleke noted that if the growth rate was too low in the corresponding period, other factors remaining same, it is likely that the current rate will be high and vice versa.
According to him, it is partly the reason frontier and emerging economies record higher GDP growth rates than developed economies.
“The second quarter of 2020 witnessed the deepest contraction in economic activity in 2020 with real GDP growth rate of -6.01 per cent year-on-year. This quarter also had the least number of economic activities recording positive growth.
“So, as the Nigerian economy gradually recovers, the dramatic decline in Q2 of 2020 becomes the starting point for calculating 12-month growth rates giving rise to base effect in the 2021 Q2 numbers,” Uwaleke said.
The reality for most Nigerians is that they are yet to feel the GDP growth, however, reacting to the situation Odeyemi told our correspondent that Nigerians may not start to see the effect of the growth on the short run.
As a country, from the micro point of view, you don’t immediately start to get the effect of that until after some time.
“This is the way it works; the man that reopened his factory will employ more staff, which is taking people out of poverty. It is an economic indicator of GDP, it will start affecting unemployment. And because he is producing more, probably, he’ll now go into export, and because he’s going into export, he’s selling more.
“Nigeria’s balance of trade will probably improve. It will also affect currency conversion, cost of goods will be going down. You can’t feel all these immediately they release the figures,” he explained.
Uwaleke opined that the NBS report is a positive sign that the economy was on the positive path despite the security challenges.
“All said, the Q2 2021 real GDP performance as reported by the NBS is cheering news for Nigeria that sends positive signal to local and foreign investors regarding the resilience of the Nigerian economy despite security challenges.
“This is especially so in view of the fact that longer-term trends such as the 12-month growth rate are considered more important than short-term changes reflected in the quarter-on-quarter numbers which are often volatile,” he said.