Last week, the NBS released its GDP report based on the expenditure approach, estimated using the well-known GDP = C+I+G+(X-M) computation.
The report indicated that household consumption accounted for the largest share of real GDP, at 60.4% in 2020. Meanwhile, Gross Capital Formation, Net Trade Balance and General Government Expenditure accounted for 15.0%, 13.3% and 9.4%, respectively. More importantly, the report showed that General Government Expenditure surged 61.6% y/y in 2020 compared to 8.78%y/y in 2019.
Also, Final Consumption Expenditure by non-profit institutions, mainly NGOs engaged in charitable activities (including aids to households) jumped 212.4% y/y. Clearly, this highlights the impact of the government intervention as a response to the pandemic amid massive aggregate demand and supply shocks in the early days of the Covid-19 pandemic.
Lasering in on household consumption, we highlight that although Real GDP growth seemed to be rebounding from prior recessions in 2016 and most recently in 2020, household consumption remains well below pre-2015 levels in real terms.
Certainly, this reflects the severity of the household income squeeze and highlights a protracted poor wage growth in a period that has been plagued with two recessions, galloping inflation and FX constraints.
Our view is that though some steps have been taken towards reform, the focus on household income growth has been grossly inadequate. Again, stunted household income growth continues to hurt Nigeria's demographic allure to private investment and limits government tax revenue. Perhaps, this explains Nigeria's poor FDI showing over the same period.