THE Nigerian Gross Domestic Product (GDP) grew by five per cent in the second quarter (Q2) of 2021, according to the National Bureau of Statistics (NBS), but economists believe there is little to cheer about it.
This is because except the five per cent GDP growth is sustained in the third and fourth quarters of 2021, annual growth of the economy may be insufficient to make any meaningful impact on the people.
At the moment, average growth of the first and the second quarters of 2021 is 2.75 per cent, which is barely equal to Nigeria’s population growth rate.
However, a sustained five per cent growth for the whole year will take the annual growth to 3.9 per cent – which is a little signal that poverty rate has started dropping.
Director-General of Lagos Chamber of Commerce and Industry (LCCI) Chinyere Almona said what mattered now was sustenance of the growth rate.
She cautioned that the country must watch and respond appropriately to the major threats to this growth performance such as the third wave of COVID-19 infections which could lead to restrictions of movement.
She also flagged a rising spate of insurgency, banditry, kidnapping, and the persistent farmer-herder conflicts as factors that could decelerate growth in the coming quarters.
Economic growth should be higher than population growth for any government to reduce extreme poverty, economists say.
Under Buhari, the Nigerian GDP growth has not exceeded the population growth rate of 2.6 per cent. Annual GDP growth in 2016, 2017 and 2018 were -1.58 per cent, 0.83 per cent and 1.89 per cent respectively.
In 2019 and 2020, annual GDP growth rates were 2.26 per cent and -0.125 per cent respectively.
This explains why extreme poverty is high under Buhari, analysts say.
About 51 per cent of Nigerians, precisely 105 million citizens, are in extreme poverty trap, according to the World Poverty Clock.
Poverty level is one of the measures of standard of living in a nation.
“We need to grow the economy at least at 7-8 per cent a year for five to 10 years based on an investment-led strategy. If we fail to do this very soon, the problems of multidimensional poverty, debt, and insecurity may consume us in the next decade,” Chief Executive Officer of Financial Derivatives Company Bismarck Rewane said in a March 2021 presentation entitled ‘Building the Future of Nigeria through Enterprise and Innovation.’
Similarly, despite the GDP growth of five per cent in Q2 of 2021, the Nigerian economy was smaller compared to the second quarter of 2019 when a mere 2.12 per cent growth was recorded.
In Q2 of 2019, the size of the Nigerian economy (real GDP or GDP at 2010 constant prices) was N16.93 trillion but growth was 2.12 per cent.
In the same quarter of 2021, the economy reported a size of N16.69 trillion but growth was five per cent. This means that fewer economic activities took place in Q2 of 2021 than in the same quarter of 2019 despite differences in growth rates.
An Economist and Private Sector Consultant Muda Yusuf attributed the situation, in an interview with The ICIR, to COVID-19, which shrunk activities and disrupted the supply chain.
But the size of an economy matters because the bigger it is, the better it is for poverty reduction, economic growth, per capital income growth and firm revenue growth, economists say.
|Quarters||GDP at 2010 constant price||GDP Constant Market Price||GDP Rtae (%)|
Moreover, the GDP is not a real measure of standard of living. The United Nations Development Programme (UNDP) adopted the Human Development (HDI) as a real measure of welfare of citizens.
It was originally developed by Pakistani Economist Mahbub ul Haq in 1990, but it has since been adopted by the UNDP.
The HDI measures access to knowledge (education), long and healthy life (health) and decent standard of living (income).
In 2020, Africa’s most populous nation dropped three places to 161 out of 189 countries in HDI, scoring 0.539 – which is a significantly low score.
Nigeria scored 152 in 2015 when Buhari took over power.
Nigerian doctors are on strike as the country parades some of the world’s worst statistics on diseases.
Nigeria’s misery index, which is calculated using unemployment and inflation rates, rose to 50.48 percent in March 2021 from 14.75 percent in 2015.
The higher the number, the more miserable the people of the nation are.
This implies that Nigerians are three times more miserable in 2021 than in 2015.
In November 2014, naira exchanged for N155 to a dollar. But it was devalued to N197 in November 2015, six months after Buhari came to power.
Analysts attribute the situation to the CBN’s reluctance to float the foreign exchange market and its insistence on controlling the supply of dollars.
Buhari has also been quoted as giving orders to the CBN governor to stop allocating dollars to certain items.
The apex bank is constitutionally empowered to be independent of politics, lawyers say, but that is not the case in Nigeria today.
Former Deputy Governor of the CBN Kingsley Moghalu said the apex bank must float the naira and stop subsidising imports.
“The government cannot continue to fix the price of the naira,which is what the Central Bank is doing. If you float the naira, you have to stop subsidisng imports. Our country is structured in such a way that it is subsidising the country’s imports.This breeds arbitrage.
“When you float the naira, you create incentive for those who want to export and earn forex. That way, you structurally shift the economy to those who want to export, but must combine it with trade policy,” Muoghalu said.
Another measure that the CBN has been adopted, which has proven to be counter-productive, is the ban on importers of raw materials from getting foreign exchange at the official rate.
The CBN has banned 46 items from milk to tomato from accessing dollars from the FX market. Analysts believe that the apex bank under Buhari is getting it wrong by simply discouraging demand for dollars and other foreign currencies.
Founder and Managing director of Cowry Assets Management Limited Johnson Chukwu told The ICIR that he did not subscribe to the use of ‘fiat’ to discourage consumption.
“I encourage the use of trade tools. The reality is that you cannot ban the consumption of commodities that people have demand for. When you do that, you force that commodity to black market, where the people will now have to pay extra cost to keep them. You cannot legislate against human consumption,” Chukwu said.
Unemployment (33.3 per cent) has tripled since Buhari came to power, and interest rate has been high compared with other peers.
Inflation is 17.38 per cent and foreign direct investments has nosedived.
The total FDI into Nigeria in the first half of 2021 was $2.78 billion, a 61 per cent decline compared to the $7.15 billion invested in the first six months of 2020, the NBS said.
“We have our work cut out for us and if we are going to achieve accelerated, sustainable and inclusive growth, we need to attract domestic and international capital with its attendant investment multiplier to achieve a GDP level of $1.5trn by 2030 when our population could be 250mn or more,” Rewane said.