Why Nigerians get poorer despite 2.25% Q3 GDP growth

AVAILABLE data have revealed why Nigerians have been getting poorer despite a 2.25 per cent growth in the third quarter (Q3) figures that the National Bureau of Statistics (NBS) recently released.

Nigeria’s gross domestic product (GDP) grew by 2.25 per cent year-on-year in Q3 2022, marking the slowest growth since the Covid-19 pandemic.

Minister of Finance Zainab Ahmed
Minister of Finance Zainab Ahmed

The NBS attributed the slow growth to the base effects of the recession and the challenging economic conditions it said impeded productive activities.

Nigerians are feeling the contraction of the economy, in the face of job losses, galloping inflation and rising petrol price. More Nigerians are being pushed into the poverty hole, with the recent revelation that 133 million people were wallowing in different categories of poverty.


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Industry watchers have been expressing concerns about the situation, saying it portends dire consequences for the country.

“We are now in cost-push inflation, whereby aggregate supply has decreased because cost of production is high. The lending rate at 16.5 per cent will squeeze SMEs. The larger implication is high purchasing cost,” a professor of Economics, Akintunde Akinwunmi,  said.

Akinwunmi added, “We have even moved from cost-push to stagflation comprising of high inflation and stagnant growth. There is no good news. The CBN last week increased the lending rate to 16.5 per cent, which even puts more pressure on small and medium scale enterprises.

Sam Amadi, Associate professor and director, Abuja School of Social and Political Thoughts

A development expert and professor at the Baze University, Abuja, Sam Amadi, said that the NNPC Ltd,  despite its commercialisation, was yet to do away with inefficiency, with its inability to remit money to the Federation Account putting Nigeria’s economy in further distress.

“The transitioning is not yielding any result. As it is now, the NNPCLtd cannot compete with its peers because of how it is still being run. Nothing has changed.

“It cannot compete with Petrobrass and Saudi Aramco. With the way NNPCLtd is going, how could they remit to the Federation Account?” he wondered.

What the Q3 figure showed about Nigeria’s economic contraction

Further insight into the third quarter economic contraction revealed that the Q3 2022 growth rate decreased by 1.78 per cent points from the 4.03 per cent growth rate recorded in Q3 2021 and 1.29 per cent points relative to 3.54 per cent in Q2 2022.

In nominal terms, aggregate GDP stood at N52.26 trillion in the quarter under review, representing a 15.83 per cent growth, compared to N45.11 trillion recorded in the corresponding period of 2021. Q3 2022 growth is higher, compared to 15.03 per cent and 15.41 per cent recorded in Q2 2022 and Q3 2021 respectively.

NNPCLtd official logo

The oil sector recorded -22.67 per cent (year-on-year) in Q3 2022, indicating a decrease of 11.94 per cent points, relative to the rate recorded in the corresponding quarter of 2021.

Growth rate decreased

Also, the growth rate decreased by 10.91 per cent points, compared to the 11.77 per cent contraction recorded in the previous period.

The oil sector contributed 5.66 per cent to the total real GDP in Q3 2022, down from the figures recorded in the corresponding period of 2021 and the preceding quarter, where it contributed 7.49 per cent and 6.33 per cent, respectively.

In the third quarter of 2022, Nigeria recorded an average daily oil production of 1.20 million barrels per day (mbpd), lower than the daily average production of 1.57mbpd recorded in the same quarter of 2021 by 0.37mbpd.

It was also lower than the 1.43 mbpd recorded in the previous quarter.

On the other hand, the non-oil sector grew by 4.27 per cent in real terms during the reference quarter (Q3 2022). This rate was lower by 1.18 per cent points, compared to the rate recorded in the same quarter of 2021, and 0.50 per cent points lower than the second quarter of 2022.

Growth in the non-oil sector was driven mainly by information and communication (telecommunication), trade, transportation (road transport), financial and insurance (financial institutions), agriculture (crop lroduction) and real estate.

The non-oil sector contributed 94.34 per cent to the total GDP, an increase from 93.67 per cent recorded in the previous sector, while the oil sector contributed only 5.66 per cent to the aggregate real GDP for the period.

A further breakdown of the report showed that the agricultural sector contributed 29.67 per cent to the aggregate GDP, an increase from 23.24 per cent recorded in the previous quarter and a 29.94 per cent decline compared to the same period in 2021.

Industries, on the other hand, recorded a decline in their contribution, from 19.4 per cent in Q2 2022 to 18.37 per cent in the review quarter. Meanwhile, services contributed 51.96 per cent to the national GDP, a significant drop from 51.96 per cent in Q2 2022.

The Q3 2022 growth (2.25 per cent ) represents the slowest GDP growth in the last six quarters.

The implications for the next elections

Industry analysts emphasise the importance of voting the right presidential candidate at the 2023 general elections.




     

     

    “We need the right leadership that can recreate jobs and reduce unemployment. It’s not negotiable. We need the right leadership that will enable the monetary and fiscal authorities together,” Akintunde said.

    He regarded foreign exchange as more of a perception issue, describing it as “an instrument that grows investors’ confidence about a country’s economy.”

    According to him, exchange rate stability is the real deal so that businesses can plan, rather than live in volatility.

    He called out the Central Bank of Nigeria (CBN) on overlending to the Federal government N20 trillion above the required threshold.

     

     

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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