Sunday, December 10, 2017 12.34PM / by Opeyemi Agbaje,
originally published in BusinessDay, Dec 6, 2017
When Nigeria’s second quarter GDP data was released, I wrote an article in this
column (“A very fragile exit from recession”-September 13, 2017) warning that
our exit from recession was very fragile and urging policy to focus on the
implications of the data, rather than a celebration of the end of recession, as
we were wont to do. Policy makers obviously did not take my counsel and the
negative trends I observed in relation to the underlying structure of our
economic “recovery” have worsened rather than improved, as Q3 GDP data will
define a recession as “…a sharp slowdown in the rate of economic growth or a
modest decline in economic activity, as distinct from a slump or depression
which is a more severe and prolonged downturn. Recessions are a feature of the
business cycle. Two successive declines in seasonally adjusted, quarterly, real
gross domestic product would constitute a recession…” (Dictionary of
Economics published by The Economist) so I do not dispute that based on the
technical definition of recessions, our Nigerian recession of 2016-2017 is
over. In spite of that however, I suggest…indeed insist that a careful reading
of the GDP data would reveal that in substance rather than form or
technicality, the recession in Nigeria is far from over!
the second quarter (April to June 2017), adjusted Nigerian Bureau of Statistics
(NBS) data reveals that the Nigerian economy as a whole grew by only 0.72%
which marked our exit from recession. The data however showed that that
happened solely because of the oil sector where prices had risen by over 10%
that quarter and production also increased by 3.31%; and indeed in that same
quarter, the growth of Nigeria’s combined non-oil economy declined from a
marginal 0.72% in the first quarter to an even more marginal 0.45% in the
in effect for the vast majority of Nigerians who were engaged in employment of
business in the non-oil economy, they were justified in feeling that they
couldn’t feel the exit from recession! The data confirmed as I highlighted in
the article earlier referred to that most of our economic sectors remained in
recession in spite of the “headline news” that we had exited recession in Q2
2017. It is important to note that the oil sector accounted for only 8% of
Nigeria’s economy in Q2 2017.
state of most sectors and the sole attribution of GDP growth to oil sector
dynamics worsened in Q3 according to recently-released NBS data. While overall
GDP growth rose to 1.4%, the non-oil economy returned into recession
contracting by -0.76%! Oil sector growth however soared to 25.89% thus
resulting in the larger headline growth recorded, especially because of base
effects from lower 2016 oil price and production due to Niger-Delta disruptions
and lower global oil prices.
data reveals that oil prices rose by 12% in Q3 while production increased by
26% in the same period over the equivalent period in 2016. Indeed the disparity
between the oil and non-oil economy worsened rather than lessened in Q3 2017!
The scale of this disparity and the real state of our economy as at September
2017 is fully revealed however when you look at specific sectors. Analysis will
show that there are three categories into which Nigerian economic sectors can
be grouped as at the end of Q3-those which are growing; those with marginal and
insignificant growth rates; and those that remain in recession. It is evident
that the first category-those growing are a severe minority!
sectors which recorded growth in Q3 were only three-oil and gas (25.89%),
utilities (7.84%) and agriculture (3.06%).
have already explained developments in the oil and gas sector; utilities growth
is explained by growth in electricity output in Q2 and Q3, while agriculture
growth while positive at 3.06% also reveals a worrying trend as the growth rate
of agricultural output has reduced from 4.5% in Q2 and Q3 2016, to just 3% by
Q2 and Q3 2017, revealing a significant variance between the hype of
diversification and the reality of reducing growth rate of agricultural
production and (if you look at inflation figures), the rising cost of
hypothesis which I also referred to in my September article is that conflicts
in the vast North Central Nigeria between herdsmen and farmers are already
impacting agricultural output, as commonsense might suggest!
category of sectors record, as I mentioned earlier, marginal or insignificant
growth in GDP-solid minerals (0.92%), accommodation and food services aka
hotels and restaurants (0.18%), administrative and support services (0.68%) and
arts, entertainment and recreation (0.44%). In addition to their marginal
growth rates, these sectors are also tiny, with insignificant impact on overall
category, which unfortunately is the vast majority of Nigerian economic
sectors, are those that remain in recession in spite of the misleading headline
news of our exiting recession in Q2 or recording 1.4% growth in
Q3-manufacturing (-2.85%), construction (-0.46%), trade (-1.74%), transport
(-6.25%), information and communication i.e. mostly telecommunications
(-4.48%), finance and insurance (-5.96%), real estate (-4.12%), professional,
scientific and technical services (-1.38%), public administration i.e. government
(-0.72%), education (-1.22%) and health (-0.85%).
These data confirm the parlous state of the Nigerian economy, and
suggest that policy is not yet impacting Nigeria’s economic performance (with
the exceptions of our improved Doing Business ranking and improved liquidity in
foreign currency markets) and that we cannot celebrate the exit from recession
or improved GDP growth that are essentially due to factors outside our control!
Indeed we would be repeating the tragic policy errors of our past if we do not
correct an unbalanced economic growth that does not impact poverty and
unemployment in our wider economy.