Skip to main content

Is Nigeria’s economy growing?



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.


In 2013, Nigeria attracted over $7 billion in Foreign Direct Investment (FDI) making Nigeria as the number one destination for investments in Africa, according to the UN Conference on Trade and Development (UNCTAD).

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

Comments

Post a Comment

Popular posts from this blog

Ogun plans low cost housing scheme

The Ogun State Housing Corporation has said that it is planning to deliver low and middle income housing estates across the state. In a statement, the corporation said its flagship scheme, Plainfields Estate, was already being developed as a community housing prototype that would provide the citizens an opportunity to buy into its plan over the next few years. According to the statement, the estate will, upon completion, have a variety of apartment units. The statement read in part, “The corporation will deliver houses and serviced plots across the three senatorial districts, but will avoid a blanket approach. “This means that these projects will be tailor-made to suit the needs of the locality and the market. Everyone who has recognisable means of livelihood in the formal and informal sectors is qualified to buy. “However, the corporation is keen to help those who need mortgages and who are first time buyers.  Because our objective is to encourage home ownershi
Post a Comment
Read more

Informal sector leads job creation in Nigeria

According to the International Labour Organisation (ILO), Africa’s working-age population is estimated to have reached over 490 million in 2012, representing a quantum leap of 259% since 2000 at an annual compound growth rate of 2.8%. Therefore, employment of the continent’s teeming labour population is key to economic development within the region and indeed, globally. Sub-Saharan Africa’s absorption of its working-age population in employment compares favourably to other regions as contained in the ILO’s 2013 global employment trends report.Subsequently, total estimated number of jobs created in the Nigerian economy for the first quarter of 2013improved by 12% over the previous quarter. This development, in line with the latest job creation report released by the National Bureau of Statistics (NBS), indicate that 174, 326 new jobs were added to the nation’s economy.  Overall, conducting quarterly labour force surveys is a positive trend for Nigeria considering the
Post a Comment
Read more

How to Make Yourself Work When You Just Don’t Want To

There’s that project you’ve left on the backburner – the one with the deadline that’s growing uncomfortably near.  And there’s the client whose phone call you really should return – the one that does nothing but complain and eat up your valuable time.  Wait, weren’t you going to try to go to the gym more often this year? Can you imagine how much less guilt, stress, and frustration you would feel if you could somehow just make yourself do the things you don’t want to do when you are actually supposed to do them?  Not to mention how much happier and more effective you would be? The good news (and its very good news) is that you can get better about not putting things off, if you use the right strategy.  Figuring out which strategy to use depends on why you are procrastinating in the first place:  
Post a Comment
Read more