As the Africa’s largest economy exited from its worst recession in 29 years on Tuesday, financial analysts have swiftly called on the federal government to go into privatization of its major sectors, while continued with capital growth projects, so as to sustain economic recovery rate.
The latest economy report from the National Bureau of Statistic (NBS), showed that Nigeria’s Gross Domestic Product (GDP) growth rate for the second quarter (Q2) 2017 grew by 0.55 per cent (year-on-year), representing 2.04 per cent higher than the rate recorded in the corresponding quarter of 2016 (-1.49%) and higher by 1.46 per cent points from rate recorded in the preceding quarter, which was revised to –0.91 per cent from –0.52 per cent due to revisions to crude output for March 2017.
Commenting on this development, Chief Executive Officer, Economic Associates (EA), Dr. Ayo Teriba, said: “You can only hope that the trend is sustained, because the entire sector grew, except services.”
He explained that Nigeria went into recession partly because of the decline in oil price and partly because of decline in oil production, adding that it was the decline of oil sector that got down the non-oil sector, because it is the oil sector that supplies the foreign exchange they required.
“So in the absence of adequate foreign exchange, the non oil sector got declined as well, which was the beginning in 2016 but now, the price has recovered enough and the quantity has recovered enough”, he further explained.
According to him, the oil sector hadn’t grown since the first quarter of 2016, so sustenance of growth is that the peace between the Niger Delta nationalist and that government be maintained that there is no destruction to oil production.
“If the current oil prices can be sustained at the current rate, then the Nigerian economic growth can be enhanced. Aside from the oil sector, the other source of foreign exchange that is open to Nigeria which seen it increasingly be adopting is to attract foreign exchange, especially though privatisation of state own enterprises.
“Saudi Arabia is in similar situation with Nigeria in May, they are now into privatization program foe 16 sectors and that they aim to attract $200 billion in foreign exchange investment, but through partial privatization of 16 sectors including oil, education, health, and sport, among many others.
“Nigeria too can do same, if we privatize even in the face of recession, we would have recover all that we have lost. So, privatization is another way for the sustenance of the recovery”, he advised.
Also, commenting on the development, a Professor of Financial Economics, University Uyo, Leo U. Ukpong, said that the new GDP growth can be sustained, if the federal government can continues to pump in some activities into the economy.
“They have to continue capital growth projects, so as to sustain the recorded economic growth”, he charged. He, however, added that coming out of recession is good news but I think we are only out of recession technically because is positive. “Even though we are not out of the zone of not worrying, because it can drop back very quickly.”
He said: “Because the contraction of 0.55 per cent recorded in the Q2 according to the latest report from the NBS showed a very weak recovery, representing a barely half per cent. Anyways, it is good news other than not strong but weak growth.”
Considering the contributed sectors, he said that Manufacturing is always well emphasized, but agriculture is very unstable because the price of agricultural to the group is very volatile, even though we are pumping a lot of money. I’m not sure we are gaining put report on agriculture. I think they put a lot of money into farming, but if manufacturing contributed that is good news because that is what will sustain and solve long time unemployment challenges.
Similarly, the Chief Economist for Africa at Standard Chartered, Razia Khan, noted that the new GDP growth report is not at all a robust GDP print.
A regional economist at Rand Merchant Bank, Celeste Fauconnier, said that it still falls far short of the growth rates the Nigerian economy should be achieving, regardless of growth moving back into positive territory, it remains fragile.
He, however, predicted a full-year expansion of just 0.5 percent, adding that an undiversified production base, a host of structural rigidities and persistent security troubles point to a prolonged and gradual recovery period.
But for the Director of Research and Development, LCCI, Mr. Vincent Nwanne, agreed with the new NBS GDP growth figure, saying that it was a good development.
He said that the improvement in the nation’s GDP growth rate showed that confidence now returning back to the Africa’s largest economy.
Nevertheless, the Oil GDP expanded considerably in the second quarter of 2017, Non-oil GDP only grew at 0.45 per cent, down from 0.72 per cent in the preceding quarter and -0.38 in the corresponding period in 2016.
It also showed that agriculture continued its strong and positive growth, which it had maintained throughout the recession, growing by 3.01 per cent in Q2 2017, from 3.39 per cent in Q1 2017 and 4.53 per cent in Q2 2016.
In view of reported economic positive growth, Special Adviser on Economic matters to the President, Dr. Adeyemi Dipeolu, attributed the positive growth to both the oil and non-oil sectors of the economy.
He said: “Growth in the oil sector which has been negative since Q4 2015 was positive in Q2 2017. It rose by 1.64 per cent as compared to -15.60 in Q1 2017, an increase of up to 17 percentage points. This improvement is partly due to the fact that oil prices which have improved slightly from the lows of last year have been relatively steady as well as the fact that production levels were being restored.
The positive growth seen in agriculture when the rest of the economy was contracting was maintained at 3.01 per cent which is encouraging especially if seasonal factors are taken into account. Manufacturing growth was also positive at 0.64 per cent and although lower than the previous quarter’s growth of 1.36 per cent, it was a noticeable improvement over the -3.36 per cent experienced in Q2 2016 and a continuation of the turnaround of the sector. Solid minerals which remain a priority of the Administration also continued to grow and in Q2 2016 by 2.24 per cent.
Overall, industry as a whole grew by 1.45 per cent in Q2 2017 after nine successive quarters of contraction starting in Q4 2014. This positive development was somewhat overshadowed by the continued decline in the services sector which accounts for 53.7 per cent of GDP. Nevertheless, electricity and gas as well as financial institutions grew by 35.5 per cent and 11.78 per cent per cent respectively in Q2 2017.
The GDP figures give grounds for cautious optimism especially as inflation has continued to fall from 18.72 per cent in January 2017 to 16.05 per cent in July 2017. Foreign exchange reserves have similarly improved from a low of $24.53 in September 2016 to about $31 billion in August 2017. In the same vein capital importation grew by 95 per cent year-on-year driven by portfolio and other investments but also notably by foreign direct investment which increased by almost 30 per cent over the previous quarter.
Foreign trade has also contributed to improving economic conditions with exports amounting to N3.1 trillion in Q2 2017 while imports which increased by 13.5% amounted to N2.5 trillion in the same period. The overall trade balance thus remained positive at N0.60 trillion.
In a related development, Special Adviser to President Buhari on Media and Publicity, Femi Adesina, said that the nation’s exit from economic recession is a clear testimony that President Muhammadu Buhari’s administration is working for the progress and prosperity of all Nigerians.
Adesina, made the declaration in Abuja while addressing a solidarity rally for the Federal Government organised by the Centre for Civil Society and Justice.
“We were told that Nigeria had officially exited recession, which shows that we have a government that is working for us; we have a government that is interested in our welfare; we have a government that is interested in our well-being.
“Recession came due to some mistakes of the past and in just about a year, the government battled it and today we are officially out of recession and we give all glory to God”, he stated.
This is even as the poll recently conducted by Newsverge, showed that Nigerians are frustrated with the continued negative effects of the prolonged economic hardship, which they said had badly affected their businesses and livelihood.
While explaining their ordeal during this economy hard time, “let me tell you the truth, a whole lot of us had packed off, even some of us that are still struggling to sustain our businesses are not finding it easy at all”, one trader explained.
Another trader, identified as Iya Niyi, who sells pepper in large quantity at the popular Ile-Epo market, told our correspondent that even though Ileya celebration is fast approaching, that turnover of their sales does not reflect the fact that it less than a week before the popular Islamic festival. She further explained that the rate, at which the price of tomatoes rose up this year is nothing to reckon with, compared to the past years, where turnover sales are very good.
“Between the first quarter through to the first six month of this year was really poor, because the price of a tomato basket springs up to be N20, 000, compared to N8, 500 we use to buy before now. In fact, we have to shade 5 pieces of tomato that used to go for N50 now sells at N200.
“Nigerians are really suffering, money is no longer circulating, the cost of food stuff in the market is really high, imagine we now buy a bag of beans for N48,000 to #50,000, what we normally use to be N28,000 now N30,000”
“Because of this abnormal changes in the prices of these consumables, we now sell derica of beans to customer at N400 for ‘oloyin’ which is known as honey bean and’olotu’ for N320 per derica, of course most people don’t buy it since the prices have gone that bad except for those that are selling cooked food”, a trader explained.
Meanwhile, Dr. Titus Okunronmu, a former Director, Budgetary Department, Central Bank of Nigeria (CBN), reacted that Nigeria’s economy had been experiencing depression rather than recession since 2015.
Okunronmu, on Wednesday said in Ota, Ogun that a recession could only last for a quarter or two. According to him, when a recession is longer than two quarters, it is called depression not recession. The former director noted that the Nigerian economy had been in depression since 2015 and which extended to 2016. ”Nigeria was in depression as a result of the inability of the Federal Government to do the right thing and the fall in the prices of oil in the international market,” Okunronmu said.