Recession: Economy Shows Signs Of Recovery – NBS

Indications that the country’s economy may be on its way out of recession emerged yesterday, following the release of the 2016 overall and last quarter Gross Domestic Product (GNP) reports by the Nigeria Bureau of Statistics (NBS), which showed some signs of recovery.

The NBS report revealed that the nation’s GDP figures for the fourth quarter of 2016 contracted by -1.3 per cent, an improvement over the -2.24 per cent contraction of the third quarter of last year.

Some economists said the development showed that the nation was on the path of recovery.

The fourth quarter figure translates to estimated economic growth rate of -1.51 per cent for the full year, meaning that the Nigerian economy performed better overall last year as the growth rate was higher than the contraction of -1.8 per cent predicted by the International Monetary Fund (IMF).

An economist who spoke with LEADERSHIP yesterday said the GDP figure had raised the hope that the recession may have bottom-up with the improving trends in several key sectors of the economy, including agriculture and mining.

The Head, Banking and Finance Department of Nasarawa State University, Dr Uche Uwaleke, said if this trend continues, “the chances are that before the end of the year, the recession in which we are will be over.”

“By the end of first quarter of 2017, we will see an improvement and before 2017 runs out, we will see positive growth in GDP. If government continues to implement the 2016 budget which is still running, chances are that the recession in which we are will be over,” he added.

On her part, chief economist, Africa, at Standard Chartered Bank, Razia Khan said, “Very shallow contraction in non-oil GDP growth in Q4 2016 raises hope of a more meaningful recovery in non-oil GDP in Q1 2017, buoyed both by improved budget spending and some improvement in forex availability.”

Also, analysts at Financial Derivatives Company Limited noted that the Q4 2016 GDP numbers “were better than expected at -1.3 per cent,” adding that “the growth numbers though historical, help to put the recession and recovery path in context”.

The FDC analysts noted that in the first two months of 2017, there have been key policy announcements and events which we expect to have a positive impact on GDP shortly.

“These include forex market reform, power output increase, targeted government spending and social intervention, as well as the increase in oil prices”, they said, noting that the slight increase may signal a return to growth in the next few months and appropriate and timely policies will be needed to sustain the growth path.

The data from the NBS showed that agriculture grew at 4.03 per cent in the fourth quarter of 2016 which was a marginal decrease from the 4.54 per cent growth in the third quarter. This is mainly because agriculture (especially crop production, which accounts for the bulk of agricultural production) is highly seasonal, with growth in the third quarter of the year usually higher than the others.

Nevertheless, the overall outcome for the year was that the agricultural sector grew by 4.11 per cent for the whole of 2016, which was higher than the figure of 3.72 per cent for 2015.

“The manufacturing sector actually grew on a quarter-on-quarter basis by 1.89 per cent but declined over the year by 4.32 per cent, reflecting the problems that the sector faced in the course of the year due to a combination of factors, including the depreciation in the exchange rate and higher energy costs.

The metal ores sub-sector grew by 7.03 per cent in Q4 of 2016 as compared to 6.93 per cent in the last quarter of 2015, thus justifying the priority that the federal government continues to give to solid minerals. The services sector, which accounted for 53.55 per cent of GDP in 2016, experienced a decline in growth by -0.82 per cent over the year as compared to a growth of 4.78 per cent in 2015.

This slowdown in the services sector arose from generally fragile economic conditions and the NBS said this was because its fortunes depend to a large extent on consumer spending and government expenditure, which were both adversely affected by difficult economic conditions.

The oil sector’s contribution to the GDP however dropped to 8.42 per cent in 2016, compared to 9.61 per cent in 2015 as the sector contracted by -12.38 per cent year-on-year. Oil production was estimated to be 1.833mb/day, compared to 2.13mb/day in 2015. This reduction, according to the NBS, is “largely been attributed to vandalism in the Niger Delta region.”

The -12.38 per cent contraction in the oil sector was however an improvement relative to the previous quarter, when the sector declined by -22.01 per cent. Nevertheless, it was a more severe decline than in the fourth quarter of 2015, when a contraction of -8.23 per cent was recorded. Quarter-on-Quarter, real oil GDP grew 8.07 per cent.

Meanwhile, the presidency said yesterday that the President Muhammadu Buhari-led administration was hopeful that, with the ongoing series of engagement with the oil-producing communities of the Niger Delta, the increased oil production output would be sustained.

A statement by special adviser to the president on economic matters, Dr Adeyemi Dipeolu, noted that the release of the Economic Recovery and Growth Plan by the Federal Executive Council (FEC) had set the stage for further fast-tracking of recovery and economic diversification.

Commenting on the latest GDP figures, Dipeolu said, ‘‘In a similar vein, the ongoing implementation of the Social Investment Programmes, the significant infrastructural spending of the federal government, and a possible early legislative passage of the 2017 budget are all expected to spur a positive multiplier effect on the Nigerian economy.

‘‘The administration will not relent in its determined effort and its comprehensive approach to bring about the full recovery of the Nigerian economy and set it on a solid path of sustainable growth.