Economic hardships persist as questions cloud Nigeria’s GDP growth report

The latest gross domestic product (GDP) report from the National Bureau of Statistics (NBS), declaring a 3.46 per cent growth rate for Nigeria’s economy in the third quarter of 2024, has set the stage for a fiery debate, with critics finding such an upward trajectory hard to fathom in the face of the country’s ever-mounting economic challenges, including a severe inflation hike, prohibitive interest rates, weakened currency, and other challenges that have sent the Nigerian public into a downward financial spiral.

Contrary to expectations, the GDP growth figure for the third quarter of 2024 arrived at a 0.92 percentage point uptick over the same period in 2023, which stood at a comparatively subdued 2.54 per cent. Such an increase defied predictions by the World Bank and the International Monetary Fund (IMF), with the former anticipating a 3.3 per cent growth rate, and the latter projecting a 2.9 per cent expansion.

The NBS report attributed this GDP growth to the strength of the Services sector, which led the charge with a 5.19 per cent increase and contributed 53.58 per cent to the nation’s GDP.

Furthermore, the Nigerian economy saw N20, 115,766.93 million worth of production in Q3 2024, not just surpassing but also eclipsing the levels recorded in Q2 2024 (N18, 285,019.24 million) and Q3 2023 (N19, 442,281.18 million).

Growth in Q3 2024 saw Nigeria’s aggregate GDP hit the N71,131,091.07 million mark, representing 17.26 per cent year-on-year nominal growth from Q3 2023’s N60,658,600.37 million and soaring above the preceding quarter’s Q2 2024 GDP of N60,930,000.58 million, making it the strongest quarter yet in recent history.

The Q3 2024 economic engine was propelled by the powerhouses of Crop Production (26.51%), Trade (14.78%), Telecommunication (13.94%), Crude petroleum (5.57%), and Real Estate (5.43%), collectively driving economic growth in the quarter.

When evaluating economic sectors, the Agricultural Sector, a cornerstone of Nigeria’s economy, expanded at a 1.14 per cent pace in Q3 2024, marking a contraction from the 1.30 per cent growth registered in Q3 2023.

Despite a period of economic turbulence, the Industry sector clocked in at a 2.18 per cent growth rate in Q3 2024, indicating an improvement from the 0.46 per cent growth posted in Q3 2023.

The Services sector, on the other hand, was up 5.19 per cent in Q3 2024, outgrowing the 3.99 per cent recorded in Q3 2023.

A breakdown of sectoral contributions to GDP revealed that Agriculture chipped in 28.65 per cent, Industry weighed in at 17.77 per cent, and Services carried the lion’s share, contributing 53.58 per cent.

The contributions of the Agriculture and Industry sectors to GDP slipped slightly in Q3 2024 compared to the same period last year, with the former down 0.66 per cent to 28.65 per cent and the latter dipping 0.22 per cent to 17.77 per cent.

However, the Services sector more than made up for this by shouldering a greater proportion of the GDP pie, growing its contribution by 0.88 percentage points to 53.58 per cent, its highest in the year.

Further breakdown of the data reveals a positive trajectory for the oil sector, with the oil GDP expanding 5.17 per cent in Q3 2024, marking an improvement from the contraction of -0.85 per cent in Q3 2023, albeit falling shy of the previous quarter’s 10.15 per cent growth.

In the overall scheme of things, the oil sector pulled its weight, accounting for 5.57 per cent of the total GDP in Q3 2024.

During the quarter in review, Nigeria’s oil production pumped up to an average of 1.47 million barrels per day (mbpd), recording a slight but steady uptick of 0.02 mbpd from the 1.45 mbpd recorded in Q3 2023 and a more pronounced 0.07 mbpd jump from the 1.41 mbpd recorded in Q2 2024.

Experts React

Even as the NBS GDP report points to a promising upswing in economic growth, the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), alongside other members of the organised private sector, remain sceptical.

Aiming the report’s questionable assertions, the NACCIMA takes a dim view of the NBS findings, pointing to the grim economic realities of rising inflation and insecurity that are all too often indicative of an economy in distress.

The NACCIMA asserts that the GDP report’s findings defy all logic, thereby casting serious doubt on the accuracy of the report’s projections.

Dele Oye, national president of NACCIMA, lambasted the National Bureau of Statistics (NBS) for its failure to account for key factors, including the ever-increasing taxes imposed by sub-nationals, the potential consequences of the 2024 tax bill, and the crippling effects of regulatory barriers that deter both domestic and foreign investment.

“As representatives of the Nigerian Association of Chamber of Commerce, Industry, Mines & Agriculture, we feel it is imperative to address the latest release by the National Bureau of Statistics (NBS) which reports Nigeria’s Gross Domestic Product (GDP) growth as 3.46 per cent.

“We must advise caution on how these figures are received and interpreted given the current realities in light of the prevailing economic challenges confronting many Nigerians countrywide.

“The significant disconnect between these statistics and the lived realities of countless citizens is concerning. The Nigerian economy is still weighed down by the effects of hyperinflation stemming from frequent fuel price hikes, power shortages and Naira devaluation which resulted in a steep rise in the cost of living for ordinary Nigerians,” Oye stated.

The NACCIMA president challenged the assertion of robust GDP growth, arguing that the continued erosion of purchasing power makes such claims highly unlikely and calls into question the accuracy of the GDP data.

Uche Uwaleke, president of the Association of Capital Market Academics of Nigeria (ACMAN), weighed in on the Q3 2024 real GDP performance, observing that the non-oil sector had steadily propelled the real GDP growth since Q1 2024, resulting in an upward trend.

Upon a closer inspection of the report, Uwaleke noted a decline in the oil sector’s performance during Q3 2024 compared to Q2, despite a marginal rise in crude oil production. This, he pointed out, hints at a downward trajectory in crude oil prices during Q3. The three-quarter average crude oil output was also revealed to be below the crucial 1.5mbpd mark.

Moreover, Uwaleke identified weakness in the agricultural sector’s performance, a reflection, he claims, of the continued strain on food inflation.

According to Uwaleke, the mounting economic pressures caused by a double whammy of steep interest and exchange rates have dealt a blow to the manufacturing sector, as indicated by its steady downward performance trend since Q1 2024.

The Capital Market professor further highlighted an uptick in the transport sector’s performance over the preceding quarter. However, he noted that this upward movement had a negligible effect on the nation’s GDP, contributing less than one per cent to the overall economic pie.

Uwaleke pointed to the financial sector’s 30 per cent growth in the face of poor performance by the agricultural and manufacturing sectors as a warning sign that the economy’s financial arm is becoming detached from its productive core, leading to a widening disconnect between finance and the production of goods and services.

Commenting on the Services sector’s performance as a driving force in GDP growth, Uwaleke stated, “In my view, this identified growth pattern, weighted in favour of the services sector, is not healthy for a developing economy such as ours. Little wonder, economic growth does not appear inclusive, reflecting rising unemployment and poverty levels.

“It is time we reset this faulty economic structure, leveraging technology, in favour of the productive sectors: Industry and Agriculture.

“Indeed, structural change is strongly recommended (by UNCTAD) as one of the ingredients of building productive capacities.”

Commenting on the GDP data and its impact on the average Nigerian, Muda Yusuf, CEO of the Centre for Promotion of Private Enterprises (CPPE), explained that the computation of GDP reflects the total output of an economy and that the different sectors do not contribute equally to this output.

According to Yusuf, some sectors have a more significant impact on economic growth, employment, and people’s lives than others.

He cautioned against relying solely on average figures, which, according to him, can mask vital information about which sectors are performing well and which are struggling.

He expounded on the challenges facing the Nigerian economy, stating that while some sectors may be doing well, others may be in recession or slowing down, leading to conflicting perceptions of the economy’s health.

To gain a comprehensive understanding of the GDP data, Yusuf stated that one would need to unpack the report’s details to reveal the underlying dynamics that give rise to these varying perspectives.

“If you look at it now, the Services sector seems to be doing very well. What is even more striking in all of this is that the financial institutions turn out to be the best performing, recording 32 percent growth which is incredible at a time when many of the sectors that are so critical to the economy are either slowing down or contracting,” he stated.

The CPPE helmsman emphasised the crucial role of data in making policy decisions, warning that the stark gap between the flourishing financial sector and the struggling sectors of agriculture, manufacturing, real estate, trade, amongst others should raise serious alarm bells.

According to him, the financial sector’s growth of over 30 per cent stands in stark contrast to the slow pace of the other sectors, indicating a disconnect between the financial system and the real economy, where most people work and live. This gap, Yusuf argues, could have significant repercussions for economic growth, employment, and economic inclusivity.

“When you have a real sector that is slowing and a financial sector that is growing, then something is wrong. That means that we need to either calibrate or recalibrate the whole reform process to ensure that the monetary authorities, especially the central bank, fine-tune its policy to be able to support the real sector more,” the CPPE chief advised.

Yusuf underscored the need for urgent action to shore up the real sector of the economy, given its central role in poverty reduction and economic development. He pointed out that even though the overall GDP figure reflects a slight uptick, it masks the fact that key sectors of the economy have decelerated significantly.