Nigeria’s growth rate slowed to 2.51 percent in the second quarter of 2023 compared to the same period of last year as job-creating sectors struggled with headwinds, adding to the pressure on President Bola Tinubu to reform the economy.
The economic growth data, which marks the 11th consecutive quarter of growth, is the first release since Tinubu embarked on reforms aimed at boosting output, which has been sluggish for several years.
“This growth rate is lower than the 3.54 percent recorded in the second quarter of 2022 and may be attributed to the challenging economic conditions being experienced,” the National Bureau of Statistics (NBS) said on Friday.
The Q2 growth rate is however higher than the 2.31 percent recorded in the previous quarter, when the country experienced an unprecedented cash crunch that dampened business activity.
“An all-out effort is needed to diversify Nigeria’s fiscal base away from oil. In the context of an economic downturn, raising revenue will be difficult. But fiscal reforms, especially creating a more stable revenue base, will be necessary for long-term sustainability,” a senior chief economist said in response to questions.
“Priority expenditure will need to be protected. While capital expenditure boosts growth, it is necessary to reduce the amount of recurrent expenditure,” he added.
Analysts at CardinalStone, a multi-asset investment management firm, said the Q2 GDP outturn was lower than the consensus estimates of 2.8 percent year on year due to a faster-than-expected contraction in the oil sector.
The country’s oil activities dipped by 13.4 percent year on year, as oil production of 1.22 million barrels per day touched the second-lowest level since 2013.
Further findings showed Nigeria’s oil sector contributed 5.34 percent to the total real GDP in Q2, down from 6.33 percent in the corresponding period of 2022 and 6.21 percent in the preceding quarter.
Niyi Awodeyi, CEO of Subterra Energy Resources Limited, cited the lack of strategy on the part of politicians as a crucial element for “this desolate economic situation”.
“It’s a fact that the government itself has not developed a vision for energy security,” Awodeyi said.
Tinubu, like his predecessor Muhammadu Buhari, appears poised to head the Ministry of Petroleum Resources.
“The last eight years under Buhari as the Minister of Petroleum left much to be desired. The mandates in the PIA for the Minister of Petroleum are very tasking and the responsibilities are daunting,” Wunmi Iledare, a renowned energy expert, said.
Apart from the oil sector, other experts raised concerns on why sectors of the economy collectively responsible for the bulk of job creation are delivering less growth than in previous years, a development that indicates more jobs cannot be created, at least for now.
Data from the NBS showed the real GDP growth of the manufacturing sector stood at 2.2 percent in Q2 2023, the lowest since Q2 2020.
According to the NBS report, the manufacturing sector contributed 8.62 per cent to GDP in Q2 2023, lower than the 8.65 percent recorded in the same period of 2022.
“When the largest sectors of the economy – agriculture and trade – are performing this badly, it means that the unemployment situation is not about to improve, and that is what needs to be done to open the economy up quickly,” Luqman Agboola, head of research at Sofidam Capital, said.
The agriculture sector grew by 1.50 percent, an improvement from the growth of 1.2 percent recorded in Q2 2022.
Analysts said the agricultural sector, a major employer of labour, has been plagued by low productivity and rising insecurity ranging from terrorism, banditry to herdsmen attacks that put farmers and their investments in peril.
“A lot still needs to be done by policymakers to help these sectors unleash their growth potentials,” Agboola said.
Damilola Adewale, a Lagos-based economic analyst, noted that these sectors critical to job creation are still struggling with growth and their capacity to create employment opportunities may not be fixed in the short term.
The economic uncertainties are making many jobless Nigerians seek opportunities to travel abroad, fuelling a massive brain drain that is hurting the labour quality of Africa’s largest economy.
“Until these sectors deliver double-digit growth rate, we will not see employment prospects,” he said.
Data from the British government showed the number of health and care workers from Nigeria granted work visas by the United Kingdom more than tripled within a year.
Last June, the Policy Advisory Council of the Tinubu administration put forward an ambitious proposal to propel Nigeria’s economy to $1 trillion within the next eight years.
To achieve its target, the council said there is a need to declare a state of emergency in revenue generation and national security, transforming key agencies such as the Federal Inland Revenue Service, Nigerian Customs Service, and Nigerian Maritime Administration and Safety Agency into the Nigerian Revenue Service, that will collect all direct and indirect taxes, as well as levies on behalf of the Federal Government.
It also listed the reform of the central bank, implementation of civil service reform/Oronsaye report, unlocking of the potential of the solid minerals sector, making of interim leadership appointments (to be ratified later by the National Assembly) and temporary increase in fiscal circuit-breakers, e.g. debt limits, later ratified by the National Assembly. (BusinessDay)
