Nigerians can be pardoned for doubting talk about
the GDP growth. They don’t see the 7 percent GDP on the streets. That is
because, as FBN Capital notes in its 2014 economic outlook, “strong non-oil
sector growth depends heavily on the informal, unbanked economy, and so would
not always be visible”.
The economy has performed robustly since 2002.
This growth has come from reforms between 2003 and 2007 in the non-oil sector
and favourable weather conditions for agriculture (Nigeria’s agricultural
output is mainly rain-fed).
The informal nature of the economy and shallow
level of financial intermediation is reflected in the solid minerals sector,
one of the five sectors that grew by double digits in the third quarter of
2013. The sector also got the largest chunk of credit from banks (21 percent)
as at March 2013. Building and construction, and real estate also grew by
double digits.
Globally, between 2002 and 2012, Nigeria was the
13th fastest growing economy; the 5th fastest growth rate in Africa. Nigeria’s
real GDP growth between 2002 and 2012 was 7.5 percent.
Testimonies of a booming non-oil sector include
mobile phones and cement. Nigeria is Africa’s largest cement market.
Cement output capacity has expanded to 28.5 million metric tonnes in 2013 from
2 million metric tonnes in 2002.
The largest number of active mobile phone
subscribers in Africa is in Nigeria (121.8 million). Nigeria’s 56 million
internet subscribers are helping to drive electronic payments. For instance,
the value of e-payment transactions in 2012 was N2.09trn (US$13.2bn), of this
amount N1.98trn was from ATM transactions.
What do the growing non-oil sectors have in
common? The rise in private consumption: household consumption expenditure (HCE),
the largest component of GDP is often equivalent to 60 to 70 percent of total
GDP. Nigeria’s HCE, in the soon to be released rebased GDP is estimated to
exceed current non-rebased GDP of $283 billion. A rebased GDP will give a more
accurate image of the economy.
This is why FMCGs and agro-allied businesses are
doing well and continue to invest. In her presentation to the House of
Representatives’ committee on finance, Okonjo-Iweala the following companies,
as examples: $250m investments by Procter and Gamble in Ogun State; $40 million
in agricultural projects by Dominion Farms in Taraba State; $1.2 billion in
fertilizer and petrochemicals by Indorama; a $200 million steel plant by Kam
Industries; and a $9 billion investment in a petrochemicals and refinery
complex by the Dangote Group.
FBN Capital says “These companies are guided by
their own very detailed research into private consumption trends. Not
surprisingly, they will not share their findings with the market.”
According to Ngozi Okonjo-Iweala, Coordinating
Minister for the Economy and Minister of Finance, 250,000 temporary jobs were
generated through dry season farming in northern Nigeria The Onne Free Trade
Zone, in Port Harcourt generated 30,000 direct and indirect job; the YouWiN
project generated 18,000 jobs and the SURE-P Community Services generated
120,000 jobs.
However, there are constraints to the speed at
which new jobs can be generated.
First, new entrants into the job market plus
existing job seekers are growing faster than the number of available jobs.
Infrastructure is the second roadblock, particularly epileptic power supply
The cost of running the Nigeria government is
high. Adding to this cost is the inefficiency and leakages that have since
become monumental. From 2006 to 2013, recurrent expenditure, as a percentage of
government expenditure, was always more than 50 percent.
More quality expenditure on infrastructure,
education, health and other social services are important, in addition to a
stable macroeconomic environment i.e. keeping inflation low, providing stable
exchange rates, and ensuring prudent levels of government borrowing.
BusinessDay
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