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Nigeria’s economy records worst decline in 10 years

Nigeria sees biggest economic decline on record in a decade

The Nigerian economy has declined by -6.10 per cent in the second quarter of 2020, indicating a significant negative growth.

It is the worst in the last 10 years since 2010, comparative analysis has shown. The Gross Domestic Product (GDP) for the second quarter of 2020 released on Monday by the National Bureau of Statistics (NBS) showed that the latest GDP contraction ended the 3-year trend of low but positive real growth rates recorded since the 2016/2017 recession.

According to a Bloomberg report, with the COVID-19 pandemic, economists had predicted about 4 per cent negative growth for Nigeria. However, the NBS report revealed it was higher than this. This was coming days after a report on the unemployment rate showed 21.7 million Nigerians were unemployed.

How Nigeria’s economy dwindled

The NBS largely attributed the economic contraction to “significantly lower levels of both domestic and international economic activity during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19 pandemic.”

The apex statistical body in Nigeria said the domestic efforts ranged from initial restrictions of human and vehicular movement implemented in only a few states to a nationwide curfew, bans on domestic and international travel, closure of schools and markets among others, affecting both local and international trade.

“The efforts, led by both the federal and state governments, evolved over the course of the quarter and persisted throughout,” the NBS said in the report.

Daily Trust analysis showed that compared to the second quarter of 2019 when the growth rate was 2.12 per cent, that of 2020 dropped by -8.22 per cent. It is a fall of -7.97 per cent compared to Q1 of 2020, which was 1.87 per cent growth rate.

For Q1 of 2020, real GDP declined by -2.18 per cent, compared with 2.11% recorded in the first half of 2019.

On a quarterly basis, the GDP dropped by -5.04 per cent. Furthermore, only 13 activities recorded positive real growth compared to 30 in the first three months of 2020.

Non-oil GDP contracted by -6.05 per cent from 1.55 per cent in Q1 2020 and the 1.64 per cent recorded Q2 of 2019. The non-oil sector contributed 91.07 per cent to the GDP in Q2 2020, as opposed to the 8.93 per cent, contributed by the oil sector.

ICT sector grows, adds 17.83% to GDP

Despite the decline in the overall GDP, the Information and Communications Technology (ICT) grew to 17.83 per cent in its GDP contribution. That was 20.54 per cent higher than its contribution in 2019, and in Q1 which was 14.07 per cent, the NBS report said. “It is worthy of note that the ICT sector contributed 17.83 per cent to the total real GDP in Q2 2020, 20.54 per cent higher than its contribution a year earlier and in the preceding quarter, in which it accounted for 14.07 per cent,” it said.

As of July 2020, the broadband penetration in the country was 42.02 per cent, translating to a percentage increase of almost double digits in less than one year.

Commenting on the impressive contribution of ICT to the GDP, the Minister of Communications and Digital Economy, Dr Isa Ali Ibrahim Pantami, said the contribution was unprecedented.

“The strategic policy directions of the federal government include the inclusion of the digital economy in the mandate of the ministry, the unveiling, and implementation of the National Digital Economy Policy and Strategy and the National Broadband Plan, amongst others,” he said.

A telecom rights activist, Deolu Ogunbanjo, said it was not surprising that ICT contributed that much to GDP. He said it was almost the only sector not affected by lockdown as a result of COVID-19.

Residents decry unemployment, hike of fuel, commodity prices

Although the COVID-19 restrictions have been gradually eased, the effects of the pandemic are still glaring among Nigerians.

Yusuf Okewale, a Lagos resident, said the recent fuel price increase, hike in prices of goods have led to an increase in expenses and a decrease to the take-home of salary earners while many still battle with the reality of becoming unemployed as a result of COVID-19.

A production manager of a bakery in Mushin, Lagos, Ajala Musa, said demands and operations have dropped significantly. He said in the last four months, production items were bought at different prices every time he visited the market and this had made it difficult to increase the prices of bread.

Mrs Bisi Qasim, a private school teacher said she could not feed her family properly for the past few months as her husband no longer has a job.

A system operator and Managing Director, Mcfost Venture, Apapa, Stanley McKay, said though the economy had declined considerably in the second quarter, his business remained relatively stable.

When asked about the economic decline, Mahmud Bello, an electrician in Kano, said: “These economic terms are not for me, what I can only tell you is that customers rarely patronise me these days.

“To be honest with you, I stay weeks without any job at hand. Sometimes if a colleague gets, he will lease some parts to us or engage us to do the job with him just to make ends meet.”

Umar Mohammed, a civil servant, said: “Even workers who live on salary are complaining; what more of those not on any monthly salary or wages? Before salary comes, expenses have taken a chunk of it making one just living hand to mouth.”

On what the government should do, he said: “It is to ensure price control so that people can get the value for their money. Prices just kept increasing astronomically, and workers or consumers are not protected.”

For Babangida Yusuf, a fish hawker: “Market is not moving. We trek distances and rest under shades when tired but honestly no patronage these days.”

The story is not better in Kaduna as many unemployed Nigerian’s have taken to the streets to hawk goods, just to eke a living.

One of them, Ibrahim Yakubu, who sells facemasks, protective shields and other items near the Kawo Motor Park said he took to hawking when he could not get a job at the very few construction sites. Our correspondent also observed that with the hike in fuel price especially for independent filling stations, Kaduna residents now troop to stations operated by the Nigerian National Petroleum Corporation (NNPC) to get products at affordable rates. A trader, Mary Idowu, lamented the increase in the price of fuel and essential goods. “Many goods are beyond the reach of traders because of the increase in price, which is not unconnected to the increase in the fuel pump price; so I just buy the little I can to sell and get the small profit that I will use to give the children because there is no point buying goods that are out of the reach of your customers.”

Abdullahi Isa who loads vehicles at Kaduna State Transportation Authority (KSTA), along Ali Akilu Road, said the increase in transportation fare was informed by the COVID-19 social distance.

He noted that because of the coronavirus pandemic, an 18-seater bus now conveys only nine passengers adding, “The passengers now pay for the remaining seats that are empty and that was responsible for the increase.

“The fare for a small vehicle conveying eight passengers from Kaduna to Katsina used to cost N1, 500; it now costs N2, 500 because only five passengers are loaded and for an 18seater bus, the fare hiked from N1, 000 to N2, 000.”

Experts react, say interventions not enough

Experts have said the crash in economic indices was expected due to the pandemic. An economist, Tope Fasua, said the N2.3 trillion interventions by the federal government to wedge the economy from the impact of COVID-19 was small relative to Nigeria’s N160tn GDP.

Reacting to the contraction of the economy, the expert said the intervention was about 1.4 per cent of the GDP.

He said many developed countries were budgeting over 10 per cent of their GDP for COVID-19 intervention, perhaps because they were more experienced over time with economic downturns and upswings.

“We should plan for at least 10 per cent or N16 trillion directed at awakening our critical sectors; infrastructure, agriculture, education, electricity, basic housing,” he said. Analysts at Afrinvest Research corroborated the NBS report’s reasons for the decline, including the pandemic.

“As the lockdowns and other restrictions have gradually been eased in Q3:2020, we expect a better performance in subsequent quarters. Our 2020 growth forecast is under review given the new numbers,’ they added.

Mr. Pabina Yinkere, Chief Investment Officer, Sigma Pensions also said it was expected. However, he was hopeful of gains.

“We expect that Q3 2020 GDP numbers will show an improvement from the 6.1% contraction in Q2 as the world and domestic economies lift lockdown restrictions.” On his part, Professor Uche Uwaleke, a capital market expert at Nasarawa State University, said there was a need to increase the interventions.

“It is important to increase the size of the various interventions by the government and the CBN and ensure they are well-targeted and implemented.”

He also said following the gradual easing of the lockdown, this might be the worst numbers this year as the economy is expected to rally in the third-quarter report.

“I think this is going to be the worst this year. A negative real GDP growth is also most likely to be recorded in Q3 2020 but the size will be smaller as the economy gets restarted and crude oil price gradually picks up,” he said.