FOUR critical sectors of the Nigerian economy slid into recession as the gross domestic product (GDP) fell by 2.5 per cent year-on-year in the second quarter of the year compared to 3.54 per cent in the corresponding period in 2022.
The National Bureau of Statistics (NBS) disclosed this in its ‘Nigerian Gross Domestic Report Q2 2023’ released on Friday, August 25.
The ICIR analysis of the report showed that oil refining, crude petroleum and gas, textile and livestock sectors contracted in the first two quarters of the year (Q1 and Q2) in real terms.
Oil refining contracted by 35.56 per cent in Q2 from 35.84 per cent in Q1; crude petroleum and gas by 13.43 per cent from 4.21 per cent; textile by 4.38 per cent from 3.68 per cent; and livestock by 2.30 from 30.57 per cent.
The sectors have been struggling because of macroeconomic, structural and policy issues, an economist, Muda Yusuf, pointed out.
“Growth in these sectors continued to be subdued by heightened inflationary pressures, exchange rate volatility, spiking energy cost, insecurity and the political economy of the oil and gas sector,” he further explained.
Yusuf, the director/chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), said Nigeria’s economy was going through corrective reforms to remove some fundamental distortions and restore the economy back to the path of recovery and growth.
He said the implementation of the reforms were an arduous task.
“The trade offs are profound and the social impact has been devastating. Given the inevitability of the reforms, the implementation calls for a delicate balancing act and strategic sequencing to ensure an inclusive economic transition.
“Dealing with the issues of insecurity, spending priorities, corruption, productivity and competitiveness, regulatory environment and macroeconomic stability are paramount to rebuilding the momentum of economic growth and development,” Yusuf stressed.
While GDP growth improved marginally by 20 basis points compared to previous quarter, however, the economy slowed amid shocks from current economic reforms which impacted energy prices and the naira exchange rate.
The adverse impacts of the reforms were disproportionately higher than expected, however, a rebound of the economy was expected in the medium to long term as current distortions in the economy are corrected.
“There is an immediate positive outcome which is the marked improvement in the fiscal space of governments at all levels,” the CPPE boss asserted.
Other sectors: road transport, coal mining, motor vehicle and assembly, music and motion pictures recorded negative growth compared to positive growth in previous quarter.
The output in the sectors contracted because of the prevailing economic and investment climate conditions, Yusuf explained.
The report also revealed that the telecommunications and information services, air transport, crop product, wood and wood products, paper and publishing, and water transport sectors recorded lower positive growth when compared to the previous quarter.
On a positive run, quarry and minerals, financial institutions, rail transport, insurance, trade, construction, manufacturing, education, agriculture and other sectors recorded better growth performance than in previous quarter.
A further analysis of the NBS report showed that the non-oil sector contributed 94.7 per cent to the GDP while the oil sector recorded a paltry 5.3 per cent.
In overall growth performance, the service sector continues to dominate the economy with a contribution of 58.4 per cent of GDP.
Yusuf further maintained that the structure of the Nigerian economy has continued to reflect its vulnerabilities, especially the challenges of productivity and competitiveness of the real economy.
Moreover, the Nigerian GDP fell short of the sub-Sahara projected average of 3.1 per cent for 2023; but better than projections for the Euro Zone of one per cent and the United States of 1.8 per cent.