The National Bureau of Statistics last week released Nigeria’s Gross Domestic Product growth rate for the third quarter of 2021 showing a 4.03 per cent growth, the fourth consecutive quarters of GDP growth since the exit of Nigeria from recession in the fourth quarter of 2020.
However, there are lingering concerns around the inclusiveness of the growth and the productivity of the non-oil sector of the economy which accounts for 92.51 per cent of the GDP. While analysts see the country ending the year with a growth rate of around 2.5 to three per cent, the concerns bothering on growth in the non-oil sector particularly the insecurity in the country remains a challenge to growth of the economy.
According to the data released by the NBS, the 2021 third quarter growth rate was higher than the -3.6 per cent growth rate recorded in the comparable period of 2020 by 7.7 percentage points, and lower than 5.0 per cent recorded in the second quarter of 2021 by 1.0 percentage points.
The non-oil sector continues to drive GDP growth, with the Manufacturing, Information and Communication, Trade, Transportation & Storage outperforming, which helped offset drags from lower crude oil production as well as uninspired growth in the agriculture sector. Notably, Q3-2021 GDP growth expanded 11.1 per cent quarter on quarter evidencing higher economic activity amid minimal pandemic-related restrictions and improved vaccinations in the quarter.
Commenting on the GDP growth figures, economist and chief executive of Centre for the promotion of Private Enterprise (CPPE), Dr Muda Yusuf noted that the concerns on the future growth of the non-oil sector are underpinned by the weak contribution of the non-oil sector to foreign exchange earnings, revenue and quality jobs.
“It is also underscored by the weak global competitiveness of the non-oil economy. Key challenges bedevilling the non-oil sector are issues bordering on the macroeconomic instability, currency depreciation, forex liquidity, regulatory constraints, policy inconsistency, security of lives and property, structural bottlenecks and barriers to import and export trade and burdensome bureaucracy.”
Also, analysts at United Capital noted that while they expect the non-oil sector to continue driving growth in the economy based on the full reopening of the economy as well as a reduction in the COVID-19 cases, issues such as insecurity pose a threat to sectors such as agric which contributes almost 30 per cent to overall GDP.
The agriculture sector had contributed 29.9 per cent of overall GDP, higher than 23.8 per cent in Q2-2021 but slower than the 30.8 per cent contribution in Q3-2020. “The sector remains highly vulnerable to insecurity issues as the farmer-herder crisis and banditry activities in key food-producing states continue to hamper production output and discourage farming activities” United Capital analysts noted in an emailed note.
Although the sector did not contract, it recorded a very sluggish growth at 1.22 per cent and Yusuf attributed this to insecurity in many parts of the country which affected many farming communities, cost of transportation which is impeding access to market putting pressure on cost of farm produce.
He furthered that the cost of farm inputs, agrochemicals and equipment, very little mechanisation and commercialisation as well as slow technology adoption in the agricultural sector. The sector is still dominated by subsistent farming, contributed to the slow growth in the agric sector.
Asides these, he said climate change issues is affecting the size of arable land in many locations, along with high cost of feed for poultry, livestock and fishery sub-sectors adversely impacted investment in the agric sector.
On the outlook for growth in the country, Head, Retail Investment, Investment Management Group, Chapel Hill Denham, Mr. Ayodeji Ebo growth in the fourth qourter of the year is expected to moderate.
“The base effect would be milder for Q4. so I expect that our growth rate should also moderate. Q2 and Q3 of last year were negative so that will impact. I don’t expect it to grow beyond the 2.5, 3 per cent level.
“It will be a very strong growth for us to achieve that 2.5, 3 per cent level. In terms of year on year growth rate there would be a moderation compared to Q3. It is not that activities would not be sustained but on base effect level we should see a lower figure.”
Analysts at United Capital also project that the Nigeria could be ending the year with a 2.4 per cnet GDP growth rate noting that the non-oil sector to continue to drive Nigeria’s recovery as unrestricted freedom of movement enables growth and full recovery in key subsectors, particularly Trade and Transportation & Storage, which are highly vulnerable to restrictions.
“In addition, the Manufacturing and Construction subsectors will continue to benefit significantly from a re-opened economy. Secular trends driving digitisation and improved access to financial services will continue to propel the Information & Communications sector, as well as the Financial & Insurance sectors. Additionally, we expect the Agriculture sector to improve in Q4-2021, on account of the harvest season.
“In the oil sector, we expect oil production to remain subdued in H2-2021, given the weakening of oil production in H2-2021. On prices, we expect oil prices to trade within the $76.00/b – $82.00/b band in Q4-2021, as demand continues to outweigh supply constraints. However, we note the potential impact of increased supply from non-OPEC parties such as the US, and China, which could keep prices in check.
“Overall, we maintain an optimistic bias for economic growth in 2021. We retain our forecast of 2.4 per cent year on year growth in FY-2021 as consumption will likely continue apace in Q4-2021, supporting output growth in the economy. Additionally, the low base from Q4-2021 should somewhat magnify recovery in Q4-2021.”