Too early to celebrate GDP growth
UNDERSTANDABLY, the Bola Tinubu administration has made a monument of the latest GDP numbers released by the National Bureau of Statistics. The numbers indicate a 68-basis point increase to 3.19 per cent in the second quarter of 2024 compared with 2.51 per cent recorded in the corresponding period a year earlier. It is also higher than the 2.98 per cent growth in the previous quarter. For the uninitiated, this sounds good.
The Presidency claims that this affirms that the government’s economic re-engineering efforts are working and that the economy is on the right trajectory and the path to recovery.
The grim realities faced by households and businesses suggest the backslapping is premature.
The Presidency conveniently sidestepped the fact that the GDP contracted from $477 billion in 2022 to $375 billion in 2023. Due to the naira devaluation, it is estimated to drop to $253 billion in 2024.
The GDP growth rate has declined steadily to minus 0.9 per cent since 2014, according to the Director-General of the World Trade Organisation, Ngozi Okonjo-Iweala due to policy inconsistencies.
While a rebound in GDP remains a positive economic indicator, it is meaningless if it does not translate into better living conditions for citizens.
The grounds for sustainability also remain fragile. There are concerns that the benefits of economic growth could remain elusive as Nigerians grapple with inflation topping 33 per cent compared with 25.8 per cent a year ago, interest rates at 26.75 per cent, and the naira trading at N1,600/$1 compared with N460/$1 in May 2023.
Analysts at investment firm, Comercio Partners, note that Nigeria’s current score of 61.96 per cent on Hanke’s Misery Index highlights the intense pressures endured by the population despite the reported economic gains. They say Nigeria’s economy may be ‘immiserizing’ – a situation where improved GDP growth does not affect the living standards.
The average retail price of petrol surged by 223.21 per cent to N769.62 per litre as of May 2024 up from May 2023. Prices have even risen higher to over N1,000 in many states. Food inflation is at 39.53 per cent and prices of staples continue to surge. Over 173 million Nigerians cannot afford a healthy diet and 133 million are multidimensionally poor.
The Q2 2024 GDP increase has been largely due to gains in the services sector, which recorded a growth of 3.79 per cent and contributed 58.76 per cent to the aggregate GDP. Agriculture’s contribution at 22.61 per cent was lower than the 23.01 per cent recorded in Q2 2023 though higher than Q1 2024 which stood at 21.07 per cent. The manufacturing sector’s contribution was 8.46 per cent, down from 8.62 per cent recorded in Q2 2023.
Economic growth should ordinarily lead to increased prosperity marked by higher demand, job creation, improved tax revenues, and public services, but the structural imbalances in Nigeria’s economy do not support this assumption.
Therefore, the Federal Government should focus on dismantling the systems that stifle investment, especially in the oil and gas, agriculture, and manufacturing sectors. Nigeria cannot leapfrog from an agrarian to a service economy without establishing a solid industrial base.
Nigeria’s economy stands to grow at 5.0 per cent if there is a 25 per cent removal of bottlenecks around governance and business regulations per IMF’s latest modelling. It needs to grow at least 5.0 or 8.0 per cent every year above the population growth to make a meaningful impact.
Instead of bandying GDP figures, the indices of economic development should be tied to a resurgence of the agriculture and manufacturing sectors, investing in education and skills to drive productivity, and fixing the electricity sector. Ajaokuta Steel must work. The blue economy must deliver on its vast potential. The government must tame insecurity.
The overall business environment needs to improve with better infrastructure and access to capital.
