Analysts on Sunday urged the federal government to continue to develop policies to attract investments to Nigeria and to sustain targeted interventions in order for the country to sustain its positive economic growth trajectory.
The advice came as the country recorded a Gross Domestic Product (GDP) growth rate of 0.51 per cent (year-on-year) in the first quarter of 2021, (Q1 2021) compared with the 0.11 per cent recorded in the fourth quarter (Q4) 2020, according to figures the National Bureau of Statistics (NBS) released yesterday.
The data indicate two consecutive quarters of growth.
However, the Q1 2021 growth rate was slower than the 1.87 per cent growth recorded in Q1 2020, but higher than the 0.11 per cent in Q4, which represented a slow, but continuous recovery of the economy.
But the GDP growth rate was still below the country’s population growth rate of about three per cent.
According to the Nigerian Gross Domestic Product Report (Q1 2021) released yesterday by the statistical agency, quarter-on-quarter, real GDP grew at -13.93 per cent in Q1 compared to Q4, reflecting a generally slower pace of economic activities at the start of the year.
In the quarter under review, aggregate GDP stood at N40.01 trillion in nominal terms. The performance was higher when compared to the N35.64 trillion recorded in Q1 2020, indicating a year-on-year nominal growth rate of 12.25 per cent.
However, real GDP in Q1 stood at N16.83 trillion.
According to the NBS, the nominal GDP growth rate in Q1 2021 was higher relative to 12.01 per cent growth recorded in Q1 2020 as well as the 10.07 per cent growth recorded in the preceding quarter.
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 Q1 2020 but higher than the 5.87 per cent in the preceding quarter.
On the other hand, the non-oil sector accounted for 90.75 per cent of aggregate GDP in Q1, higher than the 90.50 per cent in Q1 2020 but lower than the 94.13 per cent recorded in Q4.
While the oil GDP contracted -2.21 per cent in Q1 compared to a contraction of 19.76 per cent in Q4 2020 and a growth of 5.06 per cent in Q1 2020, the non-oil GDP grew 0.79 per cent in Q1 compared to 1.69 per cent in Q4.
In the period under review, average daily oil production stood at 1.72 million barrels per day (mbpd), or 0.35mbpd lower than the average daily production of 2.07mbpd recorded in Q1 2020, but higher than the production volume of 1.56mbpd in Q4.
Agriculture contributed 21.42 per cent to nominal GDP in Q1 higher than the 20.88 per cent in Q1 2020 but lower than the 24.23 per cent in Q1 2021.
Also, manufacturing contributed to 9.93 per cent to real GDP, higher than the 9.65 per cent recorded in Q1 2020 and 8.60 per cent in Q4.
Commenting on the performance of the economy in separate interviews with THISDAY, the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, described the growth level as, “as a move in the right direction, but very slow.”
He added: “But Q2 2021 is going to be much more successful.”
However, Rewane stressed the need for policies to continue to encourage investments in the country.
“There are a couple of things that are happening that are positive. There is exchange rate convergence happening; interest rates are beginning to climb back up and there are certain amounts of clarity and inflation came down marginally.
“But we still have the challenge of fuel subsidy and whether we like it or not, we have to do it. But the good news is that oil prices are high and our production is increasing and growth is beginning to creep back up,” he stated.
When asked if the challenge of insecurity was not going to hinder the current growth trajectory, Rewane, who is a member of President Muhammadu Buhari’s Economic Advisory Council, said: “Angola had 28 years of civil war and they were producing oil. Yes, insecurity is not a good thing, but we have to contain it. I think insecurity will not stop trade, construction, ICT, real estate and the production of crude oil.
“But insecurity affects agriculture and food prices. So, insecurity is a problem for agriculture and inflation and we have to deal with it. Insecurity is something we don’t need at all, but we can overcome it.”
Also, Chairman, Chartered Institute of Bankers of Nigeria (CIBN), Abuja branch, Prof. Uche Uwaleke, said the Q1 GDP report reflected an economy already on the path of gradual economic recovery with a positive real GDP growth rate following that recorded in the previous quarter.
He said although still weak at 0.51 per cent, “it is interesting to note that the manufacturing sector is now out of the negative territory increasing from -1.51 per cent to 3.40 per cent.”
He said it was noteworthy to observe the moderation in the negative performance in sectors like trade, accommodation and education.
He added: “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
“But the report also reveals 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.”
Uwaleke added that the increase recorded in the health sector from 3.05 per cent in Q4 of 2020 to 4.65 per cent showed that the country is winning the war against the COVID-19 pandemic.
An economist, Dr. Muhammad Rislanuddeen, stated that although Nigerian economy had for the last few years been having sub-optimal growth below population growth rate, the “report is very positive, especially given the positive growth also recorded in fourth quarter of 2020.”
According to him, this further indicated that the economy is picking up, albeit in a crawling, epileptic manner, from the challenges of COVID-19 pandemic.
Rislanuddeen also attributed the positive performance partly to the various stimulus packages of the federal government towards supporting the gradual consolidation of GDP growth after the economy sank into recession mid-2020.
However, he added that more targeted interventions should be done, especially in growth enhancing policies and programme to consolidate on the recovery.
He said this would help to reverse the current economic stagflation – high inflation of 18 per cent and unemployment rate of 33.3 per cent.
He said: “In addition, policies on fuel subsidy and foreign exchange market need to be much clearer and predictable to the private sector to support more investment, more jobs and sustainable growth.”
On his part, the Managing Director, Karios Capital, Mr. Sam Chidoka, said: “I think it is important that as a nation, we realise that any growth that does not match or stay close to our population growth is not the best for us.
“As a nation, we need to be growing at around four to five per cent consistently. So, in my opinion, compared to where we are coming from in terms of going into a recession, it is good, but compared to where we should be as a nation, we are doing well and there is still a lot of room for improvement.
“From the figures I’ve seen, oil GDP contracted while it is non-oil that helped us to push the growth up in Q1 2021.
“What we need to do is focus on the real engine of growth, which is the small and medium scale industries which can catalyse growth in a multiple of levels in terms of employment, productivity and more for us to see a better growth in Q2 and maybe towards the end year.”
Obinna Chima, Nume Ekeghe in Lagos and James Emejo in Abuja