By Charles Abuede
Beating analysts’ expectations
- GDP grew 9.7%q/q to N19.55trn in real term; best in 8 years
- Major growth recorded in non-oil sector with agriculture, industries, services growing at 27%, 19%, 54%
Nigeria’s economy showed resilience in the fourth quarter of 2020, beating the expectations of several economic analysts, including projections by the World Bank and the International Monetary Fund (IMF) by posting a historical 9.7 per cent quarter on quarter growth in its gross domestic product (GDP) in 8 years to N19.55 trillion in real terms.
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The argument still holds but it could now be that the credit interventions of the Central Bank of Nigeria, state development banks and other financial institutions are starting to have an impact on the economy and consequently placing Nigeria’s GDP growth as the best in the world at this time, besting China at 2.6 per cent; Japan at 3 per cent; United Stated at 4 per cent; and Columbia at 6 per cent.
From the latest data released by the National Bureau of Statistics (NBS), Nigeria, the largest economy in Africa exited from recession by the end of 2020 as its output growth returned to positive territory in the fourth quarter of 2020, with a modest growth of 0.11 per cent in the quarter, compared to the -3.62 per cent contraction of the previous quarter when it slumped into recession, following two-quarters of consecutive negative growth; and 2.55 per cent in the same period a year earlier.
Not on a few occasions did analysts make the point that Nigeria’s performance would be more muted than that of most emerging markets due to the fortification enjoyed by its large informal economy from global headwinds such as the coronavirus pandemic and the oil price shock during the year.
The Abuja based statistics office, in its published report last Thursday, did ay although the 0.11 per cent year-on-year growth is weak, the numbers reflect the return to economic activities on a gradual process following the easing of restricted movements and limited local and international commercial activities in the preceding quarters.
However, some economic analysts have voiced that it may be too early to assume automatically that Nigeria has exited its latest recession, a suggestion that Q1 2021 numbers could well prove a borderline case, since the national accounts are not seasonally adjusted and the fourth quarter tends to be the strongest of the year due to the demand boost in the holiday season.
With Nigeria’s GDP rising to N19.55 trillion and N43.56 trillion in real and nominal terms, respectively, during the fourth quarter of 2020, from N19.52 trillion in the corresponding period of 2019, the oil economy shrank by -19.76 per cent year-on-year as the data revealed an average crude oil output of 1.56 million barrels per day (mbpd) in the fourth quarter, compared with 2.00mbpd in the year-earlier period.
This is broadly consistent with compliance with Nigeria’s Organisation of Petroleum Exporting Countries (OPEC) quota of 1.41mbpd, that has since been raised to 1.52mbpd for Q1 ’21, and with adding back condensates.
Observed too, in a similar manner, is that the share of crude petroleum and natural gas in real GDP slipped to 5.87 per cent in Q4, but this would appear to be closer to 40 per cent if its linkages within the economy are permitted. It remains the fifth-largest sector after agriculture, trade, information and communications, and manufacturing. Also, it is noted that information and communications, having posted double-digit growth for three successive quarters, came close to overtaking trade.
On the contrary, the non-oil sector contributed 94.13 per cent to Nigeria’s GDP and recorded growth by 1.69 per cent in real terms in Q4 2020, slower than the 2.26 per cent recorded in the corresponding quarter of 2019, but better than the –2.51 per cent growth rate recorded in the preceding quarter; with the sectoral growth being driven by Information and Communication (Telecommunications & Broadcasting). Other drivers were Agriculture (Crop Production), Real Estate, Manufacturing (Food, Beverage & Tobacco), Mining and Quarrying (Quarrying and other Minerals), and Construction, all accounting for positive output yield.
Nigeria’s Q4 GDP numbers beat projections from around the world
Analysts’ expectations of a continued or lingering negative growth through the first six months of 2021 have now been beaten by the historical growth recorded by the nation’s output in 2020.
As reported by Business A.M. a couple of weeks ago, the World Bank in its most current 2021 global economic outlook, expects Nigeria’s output to post a contraction of 4.1 per cent in 2020, with the activity level in the economy also expected to be dampened by low oil prices, falling public investment as a result of low government revenues, OPEC quotas, constrained private investment due to firm failures, and subdued foreign investor confidence in 2021 with 1.1 per cent growth.
It can be recalled that in 2020, Nigeria’s output fell sharply resulting from the economic impact of the pandemic in all sectors. Consequently, Nigeria’s output was estimated to witness a 4.1 per cent contraction in 2020, according to the largest international source of fund for developing countries, following the outbreak of the pandemic in the sub-Saharan African region, undergoing a strict lockdown that brought the already weak economy to a standstill.
A recent survey by the International Monetary Fund (IMF) in its 2020 Article IV consultations on Nigeria projected a real GDP contraction of -3.2 per cent for 2020, with a weak recovery likely to keep per capita income stagnant and no higher than the 2010 level in the medium term.
The IMF pointed out that the projected weak recovery for Nigeria this year is to a certain extent, and driven by expectations of subdued global growth and decarbonisation trends, which are expected to limit the increase in oil prices.
In-country analysts such as at Financial Derivative Company, a research and financial advisory firm based in Lagos, asserted that positive growth will likely be witnessed during the third quarter of 2021 and that this is likely to be driven by land border reopening, AfCFTA and the pickup in economic activities.
Negative growth to linger through the first and second quarters of 2021 but the rate of contraction will be slow. Across sectors of the economy, uneven recovery is expected; there will be an improvement in growth from the first quarter and to be majorly driven by Construction, ICT and financial institutions, they had predicted.
Similarly, analysts at FSDH Capital Research asserted that in the 2021 fiscal year, with no further disruption, Nigeria could return to positive growth in Q2 & Q3 of 2021 given the weak link between GDP improvement and social indicators that can ensure that economic recovery continues. However, several sectors such as trade and real estate will continue to perform below par.
Surprisingly, for most analysts and international monetary agencies, who had before now expressed doubts of an early exit from the economic downturn, Nigeria’s show of resilience in its national output in the last quarter despite the -1.92 per cent contraction on a year on year comparison is a bold indication of what is to come amidst the security challenges, rising inflation and unemployment numbers.
This leaves the mark that the rugged Nigerian economy is off the blurry path to some recovery.