- Drop in sectors’ GDP contribution threatens FG’s $1trn economy – Analysts
Nigeria’s Gross Domestic Product growth rate of 3.84% in Q4 2024 signals a gradual economic recovery, driven primarily by the Service Sector, forex market stability, and potential interest rate cuts, according to financial analysts.
The National Bureau of Statistics had on Wednesday said the Gross Domestic Product in real terms grew by 3.84 per cent in the fourth quarter of 2024 on a year-on-year basis, which is 0.38 per cent points higher than the rate recorded in Q4 2023 (3.46 per cent).
This reflected a higher economic improvement when compared to the preceding quarter (Q3 2024), with the service sector still playing the role of the major driver of the economy which recorded a growth of 5.37 per cent and contributed 57.38 per cent to the aggregate GDP.
The NBS report stated that there was a decline in the performance of agriculture and industry in 2024 relative to 2023, while the performance of the Services sector improved in 2024.
The major contributing economic activities in real terms in the quarter under review are crop production 23.42 per cent, trade 15.11 per cent, telecommunication 14.40 per cent, real estate 5.88 per cent, financial institutions 5.76 per cent, and crude petroleum 4.60 per cent.
Analyses of the contributions of the broad economic sectors in the period under review showed that agriculture contributed 25.59 per cent, industry 17.03 per cent, and services 57.38 per cent. Agriculture and industry’s contribution was less than their contributions in Q4 of 2023 by 0.53 per cent and 0.31 basis points.
The Services sector had the highest contribution to the GDP in Q4 2024, surpassing their contribution in the corresponding quarter of 2023 by 0.83 per cent basis points.
The annual contributions of the economic sector show that Agriculture contributed 24.64 per cent in 2024 which is lower compared to its contributions which stood at 25.18 per cent in 2023.
Similarly, the industry sector’s annual contribution was 18.47 percent which is also lower than the figure recorded for 2023 (18.65 per cent).
However, the services sector contributions for 2024 were 56.89 per cent which exceeded the 56.18 per cent recorded for 2023.
But concerns persist over the underperformance of the agriculture and industrial sectors, which pose a significant risk to the Federal Government’s ambition of achieving a $1 trillion economy.
Analysts, speaking exclusively to The Point, noted that the economic expansion reflects gradual resilience following the shocks of fuel subsidy removal and exchange rate unification.
Structural reforms, improved investor confidence, and strong performances in services and telecommunications have contributed to this growth—despite high inflation and borrowing costs.
Professor Uche Uwaleke, Nigeria’s first Professor of Capital Market, highlighted that while crude oil output improved in Q4 2024, agriculture and industry continued to struggle, necessitating urgent fiscal interventions.
“The expansion in economic activities in 2024 signals a gradual easing of the severe shocks from fuel subsidy removal and exchange rate unification
“However, despite the improvement in crude oil output, the real sectors—agriculture and industry—remain under pressure,” Uwaleke said.
He stressed that targeted fiscal incentives are necessary to stimulate productivity and job creation in these sectors.
“Strategic interventions such as tax reliefs, access to affordable credit, and infrastructural support are crucial in enhancing the contribution of agriculture and industry to GDP growth,” he added.
The Managing Director of Arthur Steven Asset Management Limited, Olatunde Amolegbe, described the GDP growth as a positive sign that the economy is rebounding from policy shocks.
“The Service Sector remains the primary driver of growth, aligning with historical trends. However, with forex market stability and a possible decline in interest rates, Industrials and Consumer Goods could contribute more robustly in coming quarters,” Amolegbe stated.
Amolegbe projected that if current macroeconomic trends hold, Nigeria’s economy could outperform analysts’ expectations for 2025, potentially necessitating a revision of economic forecasts.
A senior broker, who spoke on condition of anonymity, noted that the 3.84% GDP growth rate surpasses the 3.46% recorded in both Q4 2023 and Q3 2024, reinforcing the resilience of the economy. However, he warned that macroeconomic fundamentals remain fragile.
“Inflationary pressures are high, exceeding 34%, while borrowing costs remain steep at 27.5%. Although naira devaluation has improved export competitiveness, rising input costs for businesses reliant on imports could hurt industrial output,” he cautioned.
To sustain growth momentum, he recommended policies focused on enhancing the ease of doing business, addressing structural bottlenecks, boosting foreign and domestic investments, improving infrastructure and power supply, and implementing inflation control measures and exchange rate stability.
Despite the reported GDP expansion, the Managing Director of Highcap Securities Limited, David Adonri, expressed doubts over the accuracy of the figures, suggesting that the growth could be inflationary rather than real.
“I seriously doubt if this growth is real. It appears to be majorly inflation-driven, considering how high inflation was during the period. Other than banks, real-sector enterprises continued to struggle,” Adonri stated.
While Nigeria’s economy shows signs of recovery, analysts caution that high inflation, forex volatility, and the weak performance of key sectors could undermine sustained growth.
To achieve the $1 trillion economy target, the government must implement aggressive fiscal interventions to revitalize agriculture and industry while ensuring macroeconomic stability.