State of the Nigerian economy: understanding the latest figures released by the National Bureau of Statistics (NBS)

Nigeria’s National Bureau of Statistics (NBS) recently released the GDP figures for the 4th quarter of 2016. This publication provides a lot of insights and also throws up a lot of questions regarding the effectiveness of  government policy so far in handling the recession. Before proceeding to the analysis, let me highlight some of the relevant features:

2017-03-06 18.10.08

  • Nigeria’s GDP fell by 1.51% for the entire year of 2016
  • Oil production for the entire 2016 was 1.833 million barrels per day compared to 2.13 million barrels per day in 2015.  That is about a 16% decline in oil production
  • Growth in the oil sector declined by 12.38 % relative to the 3rd quarter while growth in the non – oil sector declined by 0.2% relative to 2015.
  • For the year 2016, Agriculture, and Arts, Entertainment and Recreation  grew by 4.32 % and 3.72% respectively.
  • Manufacturing, Construction, trade, power and real estate contracted by 4.32%, 5.95%, 0.25%, 15% and 9.72 % respectively.

From the statistics above, we can reach the following conclusions:

  • 2016 was indeed a terrible year for Nigeria’s economy and the government has a lion share of the blame.The economy got worse not only because oil prices fell by over 67% but also because production levels fell by 16%.   It is true that government does not have control over oil prices but it certainly does have control of the production levels. Oil production levels declined due to pipeline vandalization by Militants in the Niger Delta and why did these vandalizations continue unabated? Because the government refused to engage with them through dialogue but resorted to the use of military force.The fact that the President has not stepped foot in the Niger Delta since he assumed office should in fact tell you something. It is unfortunate that in a so-called Democracy, it needs to be said that military force should be the last resort. I hope we learn…I mean, I hope the President learns. The Vice – President seems to be learning as he has spent the past couple of months touring oil-producing communities and oil production levels have increased significantly.

2017-03-06 18.11.00

  • For all the noise about economic diversification, the non – oil sector declined by 0.2%. Besides agriculture which grew from  3.72 % in 2015 to 4.11% in 2016, growth rate in other sectors fell significantly. In Manufacturing, growth reduced by 4.32% in 2016 compared with a reduction of 1.46 % in 2015; growth reduced by 5.95 % in construction in 2016 relative to an increase in growth by 4.35 % in 2015; In Arts, Entertainment and Recreation, growth fell from a whooping 9.40% in 2015 to 3.77% in 2016.What makes these figures bad are that these are the sectors that are supposed to drive the diversification agenda. What is even worse is that the contraction in these sectors was largely avoidable. The inconsistent policies of the Central Bank are largely to blame. Apart from the massive depreciation of the Naira, the exclusion of certain industries from accessing the foreign exchange needed to purchase raw materials and inputs was ill advised. What it in fact did was force many business to either lay off staff, close operations or do both.The Central Bank needs to stop this demand management as it is neither effective nor sustainable. On the fiscal policy side, the lack of a coherent recovery strategy did not bode well for the economy. In fact, the perception of a lack of strategic direction combined with the monetary policy inconsistencies was a huge deterrent to both local and international investors who would have otherwise invested in these critical sectors.

2017-03-06 18.09.16

  • Another interesting data set on Nigeria’s imports and exports was released over the weekend .Nigeria’s top imports were not  your Italian wines, Kellogs Cornflakes Mcvities biscuits etc. In fact, these things accounts for less than 10% of imports into Nigeria. So when next anyone attempts to guilt trip you into #buynaijatogrowtheNaira, feel free to vehemently disagree with them. The economy is tanking not because Nigerians do not purchase locally produced goods but because the environment for business is not conducive enough to enable local producers compete with their foreign counterparts in terms of prices and quality.

Screenshot_2017-03-05-10-26-54 (1)

Though these figures are terribly depressing, what they do is  enables government and policy makers understand the effectiveness of their plans and their real time consequences. In normal climes, they would draw lessons from it and go back to the drawing board to re-strategize, but Nigeria is not quite normal.  My hope is that I am proven wrong and that 2017 is the year we get it right with the economy!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s