On Monday, May 20, 2019, Nigeria’s National Bureau of Statistics (NBS) released the GDP figure for the first quarter (Q1) of 2019. According to the report, Nigeria’s economy grew by 2.01 percent in Q1 2019 which is a 0.12 percent increase from the figure of Q1 in 2018.
The report which talked about both the nominal and real GDP also revealed that relative to the fourth quarter of 2018, the real GDP growth rate declined by -0.38 percent. This growth occurred despite the drop in the global prices of oil. It is worthy to note that Nominal GDP is the GDP calculated without the effects of inflation or deflation whereas Real GDP is calculated only after giving the effects of inflation or deflation.
According to NBS, despite holding general elections across the country during the period under review, it is still the strongest first quarter performance observed since 2015 when an election also took place.
Nigeria’s highest Gross Domestic Product (GDP) growth rate remains 14.6 percent, which was recorded in 2006, research reveals.
How the oil and non-oil sector fared in the first quarter of 2019
According to NBS, the non-oil sector contributed 90.86 percent to the growth of the GDP as opposed to the oil sector, which contributed 9.14 percent.
The oil sector:
In Q1 2019, the average daily oil production stood at 1.96 million barrels per day (mbpd). This was lower than the 1.98 mbpd recorded in the same quarter of 2018 and higher than 1.91mbpd recorded in Q4 2018.
The oil sector recorded a real GDP growth rate of -2.40 percent (year-on-year) in Q1 2019 indicating a decrease by -16.43 percent points relative to the rate recorded in the corresponding quarter of 2018.
The non-oil sector:
The non-oil sector grew by 2.47 percent in Q1 2019. This is 1.72 percent points higher than the growth rate recorded in Q1 2018 and -0.23 percent points lower than the fourth quarter of 2018.
The key performing activities in the sector during Q1 were information and communication technology, transportation & storage, arts and entertainment, agriculture, trade and construction. The Non-Oil sector contributed 90.86 percent to GDP in the first quarter of 2019, which is slightly higher than the 90.45percent seen in Q1 2018.
The Agriculture sector is made up of four sub-activities: crop production, livestock, forestry and fishing, with crop production remaining the major driver of the sector with 85 percent of agriculture GDP.
During the quarter, the sector contributed 21.91 percent to real GDP, higher than the contribution in the first quarter of 2018 (21.66 percent) but lower than the fourth quarter of 2018 (26.15 percent).
Transportation and Storage
There are six activities that make up the transportation and storage sector: road transport; rail transport and pipelines; water transport; air transport; transport services and post and courier services. The sector grew by 50.39 percent in nominal terms in the first quarter of 2019 (year on year). This rate is relatively higher than the 18.73 percent recorded in Q1 2018 and 32.89 percent in Q4 2018. The fastest growing activities in this quarter were road transport at a rate of 53.22 percent and Air transport at a rate of 39.86 percent year on year.
Information and Communications Technology
The Information and Communication (ICT) sector comprises of the four activities of telecommunications and information services; publishing; motion picture, sound recording and music production and broadcasting.
The sector in the first quarter of 2019 recorded a growth rate of 9.48 percent in real terms, year on year, representing an increase of 7.90 percent points. Quarter on Quarter, the sector exhibited a growth of -7.29 percent in real terms. In terms of contribution to real GDP, the sector contributed 13.33 percent in Q1 2019, higher than in the same quarter of the previous year in which it accounted for 12.42 percent and in the preceding quarter, in which it represented 12.40 percent.
In the first quarter of 2019, in real terms, Trade’s contribution to GDP was 16.87 percent, lower than the 17.07 percent it accounted for in the previous year, but higher than the 16.50 percent recorded in the fourth quarter of 2018.
The real growth rate of the construction sector in the first quarter of 2019 stood at 3.18 percent (year on year), which is 4.71 percent points higher than the rate recorded in Q1 2018. Relative to the preceding quarter, there was an increase of 1.13 percent points. Quarter on quarter, the sector grew by 1.36 percent in real terms. By contribution, the construction sector accounted for 4.09 percent of real GDP in the first quarter of 2019, higher than its contribution of 4.04 percent in the same quarter of 2018, and the 3.48 percent contribution recorded in the preceding quarter.
What a GDP of 2.01 percent means for Nigeria
According to Andrew S. Nevin, Advisory Partner and Chief Economist at PWC, for a number of years now Nigerians have been getting poorer and poorer per capita, as the growth of GDP is below the population growth of 2.7 percent per annum.
The country grew 2.7 percent in GDP in 2015, meaning there is no growth in GDP per capita. In 2016, the GDP shrank and grew below population growth in 2017 and 2018. Now the country begins 2019 with its GDP growth below population growth again, and Q1 2019 GDP growth of 2.01 percent is a decline from the growth in Q4 2018.
“Nigeria cannot continue with GDP growth below population and we urgently need policies and approaches that allow us to grow GDP at 6-8 percent per annum in an inclusive way. Only at 6-8 percent growth can we reduce the number of poor Nigerians significantly and start to tackle the immense challenge of youth unemployment in the country,” Nevin told TheNerve Africa.
What needs to be done
Nevin further said that some of the policies that PwC Nigeria would like Nigeria to consider include:
a. Reforming the Land Use Act so we see a much more robust real estate sector and tackle the 17m housing deficit
b. Decentralizing the power approach so the power crisis can be addressed at the local and state level; new technologies (including off-grid solar) provide many more options to produce electricity at a reasonable cost according to local conditions
c. Unifying the exchange rate so that foreign investors are not confused and the potential for abusing the FX system is eliminated. In addition, states would receive more Naira from the Federal Allocation, alleviating some of the difficulties in paying State salaries
d. Eliminating the fuel subsidy and channelling the savings into infrastructure, healthcare, and education
e. Passing some form of the PIB so that investment starts to flow again to oil and gas; as part of this NNPC should consider structural changes clarify its roles as a regulator and its roles as an operator.
In addition to these structural changes, PwC Nigeria would like the Federal and State Governments to consider a more active and strategic approach to the Nigerian Diaspora. This is because remittances from the diaspora are estimated at $25 billion in 2019 for the official flow. These are Nigerians largest flow of FX, and the Nigerian diaspora is large and very successful. Better engagement with the diaspora would result in a flow back to Nigeria both in resources for investment and also skills and capabilities to help build Nigeria.