There appears to be a better future for Africa’s largest economy as the non-oil sector of the economy is gradually becoming a major driver of economic growth even as the oil sector continues in its lackluster performance. BUSAYO SAMUEL reports.
At the end of the third quarter of the fiscal year ending September 30, 2021, Nigeria, largest economy in Africa, recorded an aggregate Gross Domestic Product (GDP) of about N45.1 trillion. The figure represents a nominal growth of 15.41 percent year-on-year compared to about N39.09trillion recorded in the second quarter of 2021.
The nominal GDP growth rate in Q3 2021 was higher relative to 3.39 percent growth recorded in the third quarter of 2020 as well as the 14.99 percent growth recorded in the preceding quarter.
According to the National Bureau of Statistics, GDP grew by 4.03 percent (year-on-year) in real terms in the third quarter of 2021, showing a sustained positive growth over the last four quarters since the recession witnessed in 2020 when output contracted by -6.10 percent and -3.62 percent in Q2 and Q3 of 2020 under the Covid pandemic.
Appreciably, Q3 2021 growth rate was higher than the -3.62 percent growth rate recorded in Q3 2020 by 7.65 percent points but lower than 5.01 percent recorded in Q2 2021 by 0.98 percent points.
“Muda Yusuf, economist and Chief Executive Officer, Centre for the Promotion of Private Enterprise, said the performance is a welcome development
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The NBS has indicated that growth in the third quarter period was largely driven by activities in the non-oil sector, specifically the service sub-sector where economic activities are gradually returning after lockdown due the Covid-19 Pandemic in 2020.
Financial experts who commented on the Q3 2021 GDP performance are unanimous in their opinion, noting that the economy is headed in the right direction.
Muda Yusuf, economist and Chief Executive Officer, Centre for the Promotion of Private Enterprise, said the performance is a welcome development, noting that the implication is that the positive growth trajectory has been sustained.
The former Director General of the Lagos Chamber of Commerce and Industry said the performance is largely a reflection of the progressive normalisation of economic activities, the recovery of sectors that were earlier under lockdown and the restoration of supply chains that were disrupted at the onset of the Covid pandemic.
Meanwhile, Muda cautioned that in order to accelerate the economic recovery and inclusion processes, current macroeconomic challenges need to be fixed.
“These include the high inflationary pressure, exchange rate depreciation and liquidity issues in the forex market. Investment climate issues also deserve urgent attention. These include the challenges of cargo clearing, port congestion, and other impediments to the international trade processes, regulatory issues, policy inconsistency and security concerns around the country.”
Another economist, Boniface Chizea, Managing Director and CEO, BIC Consulting Limited, said the Q3, 2021 GDP figure is realistic, noting that the projection is an overall growth by year end 2021 of circa 2 percent.
“Yes! The 5.1% GDP growth in the second quarter was largely driven by the base effect. It was related to the period when the growth was in the negative territory at -6.1%,” he added.
Also, financial analysts at Cordros Capital in a report disclosed that the review Q3 2021 GDP performance was in line with their expectation.
“Nigeria’s economy grew slower in Q3-21 compared to the prior quarter, as the impact of the favourable base from the prior year began to dissipate,” they explained.
Looking ahead, Cordros Capital projected that GDP growth will settle at 2.44 percent y/y in Q4-21 while revising its 2021 full year growth forecast to 2.94 percent y/y as against the previous 2.68 percent.
How They Stand
Oil
The nation in the third quarter of 2021 recorded an average daily oil production of 1.57 million barrels per day, lower than the daily average production of 1.67mbpd recorded in the same quarter of 2020 by 0.10mbpd and lower than the second quarter 2021 production volume of 1.61mbpd by 0.05mbpd.
Real growth of the oil sector was –10.73 percent (year-on-year) in Q3 2021 indicating an increase by 3.16 percent points relative to the rate recorded in the corresponding quarter of 2020. Growth increased by 1.92 percent points when compared to Q2 2021 which was –12.65 percent. Quarter-on-Quarter, the oil sector recorded a growth rate of 12.05 percent in Q3 2021. The Oil sector contributed 7.49 percent to total real GDP in Q3 2021, down from figures recorded in the corresponding period of 2020 and up compared to the preceding quarter, where it contributed 8.73 percent and 7.42 percent respectively.
Non-oil
The non-oil sector grew by 5.44 percent in real terms during the reference quarter (Q3 2021). This rate was higher by 7.95 percent compared to the rate recorded in the same quarter of 2020 and 1.30 percent lower than the second quarter of 2021. This sector was driven in third quarter 2021 mainly by trade, Information and Communication (Telecommunication); other drivers include Financial and Insurance (Financial Institutions); Manufacturing (Food, Beverage & Tobacco); Agriculture (Crop Production); and Transportation and Storage (Road Transport), accounting for positive GDP growth. In real terms, the Non-oil sector contributed 92.51% to the nation’s GDP in third quarter 2021, higher from the share recorded in the third quarter of 2020 which was 91.27 percent and lower than the second quarter of 2021 recorded as 92.58 percent.
Agriculture
The sector grew by 7.95 percent year-on-year in nominal terms in Q3 2021, showing a fall of 5.57 percentage points from the same quarter of 2020. Looking at the preceding quarter’s growth rate of 6.36 percent, there was an increase of 1.59 percentage points. Crop Production remained the major driver of the sector. This is evident as it accounts for 87.32 percent of overall nominal growth of the sector in third quarter 2021. The sector contributed 29.94 percent to overall GDP in real terms in Q3 2021, lower than the contribution in the third quarter of 2020 and higher than the second quarter of 2021 which stood at 30.77 percent and 23.78 percent respectively.
“Looking ahead, Cordros Capital projected that GDP growth will settle at 2.44 percent y/y in Q4-21 while revising its 2021 full year growth forecast to 2.94 percent y/y as against the previous 2.68 percent
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Manufacturing
Nominal GDP growth of the manufacturing sector in the third quarter of 2021 was recorded at 32.73 percent (year-on-year), 19.18 percentage points higher than the figure recorded in the corresponding period of 2020 (13.54%) and 5.60 percentage points lower than the preceding quarter figure of 38.33 percent. The contribution of Manufacturing to Nominal GDP in third quarter 2021 was 15.59 percent while Real contribution to GDP in 2021 third quarter was 8.96 percent, higher than the 8.93 percent recorded in third quarter of 2020 and higher than the 8.69 percent recorded in second quarter 2021.
Construction
The Construction sector grew by 47.67 percent in nominal terms (year on year) in the 2021 third quarter, a rise by 12.17 percentage points compared to the rate of 35.50 percent recorded in the same quarter of 2020. There was an increase of 0.56 percent points when compared to the rate recorded in the preceding quarter. Construction contributed 9.26 percent to nominal GDP in the third quarter of 2021, higher than the 7.23 percent it contributed a year earlier and higher than the 8.74 percent contributed in the second quarter of 2021. Its contribution to total real GDP was 3.22 percent in the third quarter 2021.
Information and Communication
In nominal terms, in the third quarter of 2021 the sector growth was recorded at 11.17 percent (year-on-year), 4.74 percentage points decrease from the rate of 15.91 percent recorded in the same quarter of 2020, and 11.24 percentage points higher than rate recorded in the preceding quarter. Of total real GDP, the sector contributed 14.20 percent in the 2021 third quarter, higher than in the same quarter of the previous year in which it represented 13.47 percent and lower than the preceding quarter in which it represented 17.92 percent.
Trade
In the third quarter of 2021, the nominal year on year growth rate of Trade stood at 14.84 percent. This indicates an increase of 24.66 percentage points when compared to the third quarter of 2020 growth rate of -9.82 percent and 8.43 percent points lower than the previous quarter growth rate of 23.27 percent. Trade’s contribution to total GDP was 14.93 percent, higher than the 13.88 percent it represented in the previous year, and lower than the 16.66 percent recorded in the 2021 second quarter.
Accommodation and Food Services
In nominal terms, Accommodation and Food Services grew by 19.20 percent year -on- year in 2021 third quarter. This represents an increase of 28.84 percent points relative to the same quarter of 2020, when the growth rate was -9.64 percent. The real year-on-year growth rate for this sector in the 2021 third quarter stood at 2.09 percent, higher by 24.70 percent points from -22.61 percent recorded a year previous. The sector in the third quarter of 2021 represented 0.69 percent of the real GDP, which is lower slightly with the contribution of 0.70 percent recorded in the third quarter of 2020 and higher than the second quarter 2021 contribution of 0.40 percent.
