GDP remains sluggish, grew by 2.54% in Q3

Nigeria’s Gross Domestic Product remained subdued in the third quarter, growing marginally by 2.54 per cent year-on-year in real terms in the third quarter of 2023, the National Bureau of Statistics has disclosed.

This growth rate is higher than the 2.25 per cent recorded in Q2, 2022, and higher than the second quarter 2023 growth of 2.51 per cent. The service industry was responsible for the growth in the quarter.

It said, “Nigeria’s Gross Domestic Product (GDP) grew by 2.54 per cent  (year-on-year) in real terms in the third quarter of 2023.”

 In its “Nigerian Gross Domestic Product Report (Q3, 2023),’ released on Thursday, the NBS continued, “The performance of the GDP in the third quarter of 2023 was driven mainly by the Services sector, which recorded a growth of 3.99 per cent and contributed 52.70 per cent to the aggregate GDP.

“The agriculture sector grew by 1.30 per cent, from the growth of 1.34 per cent recorded in the third quarter of 2022. The growth of the industry sector was 0.46 per cent, an improvement from -8.00 per cent recorded in the third quarter of 2022. In terms of share of the GDP, agriculture, and the industry sectors contributed less to the aggregate GDP in the third quarter of 2023 compared to the third quarter of 2022.”

In the quarter under review, aggregate GDP stood at N60.66tn in nominal terms, a performance higher than Q3, 2022 which recorded aggregate GDP of N52.26tn, indicating a year-on-year nominal growth of 16.08 per cent.

According to the NBS, daily oil production improved to 1.45 million barrels per day mbpd), from the 1.20mbpd recorded in the same quarter of 2022. This slowed the contraction in the oil sector in Q3.

The statistic body said, “The real growth of the oil sector was –0.85 per cent (year-on-year) in Q3 2023, indicating an increase of 21.83 percentage points relative to the rate recorded in the corresponding quarter of 2022 (-22.67 per cent).

“Growth also increased by 12.58 percentage points when compared to Q2 2023 which was –13.43 per cent. On a quarter-on-quarter basis, the oil sector recorded a growth rate of 12.47 per cent in Q3 2023.”

The oil sector contributed 5.48 per cent to the total real GDP in Q3 2023, down from the figure recorded in the corresponding period of 2022, the NBS stated.

The non-oil sector of the economy grew by 2.75 per cent in real terms in Q3 2023 largely because of the positive growth of Information and Communication (Telecommunication): Financial and Insurance (Financial Institutions); Agriculture (Crop production); Trade; Construction; and Real Estate, accounting for positive GDP growth.

In real terms, the non-oil sector contributed 94.52 per cent to GDP in Q3, 2023.

Nigeria’s economic growth has remained subdued. Recently, the International Monetary Fund reviewed its economic growth projection of the country by 0.3 percentage points to 2.9 per cent for 2023 because of weaker oil and gas production. High inflation is also expected to contribute to this decline.

Both the IMF and World Bank expect Nigeria’s economy to grow by 2.9 per cent in 2023. Low oil production, lower international oil prices, and recent policy actions to remove fuel subsidies and unify the exchange rates are expected to weigh down on economic activities in the short term.

Economist Dr. Alias Aliyu warns of the service sector overshadowing critical issues and a significant decline in agriculture, emphasizing struggles and insecurity concerns.

Aliyu shifts focus to the industrial sector, highlighting challenges in manufacturing, including unsold units and companies relocating, impacting essential goods.

“The industrial sector, particularly manufacturing, grapples with the issue of unsold units, posing a substantial challenge to our economic landscape,” noted Aliyu.

“Notably, companies like GSK opting to relocate from Nigeria contribute to a shortage of essential goods, exemplified by escalating prices, even for necessities like malaria drugs,” Aliyu added, highlighting the tangible impact on everyday commodities.

“The lagging performance of both the industrial and agricultural sectors underscores the seemingly robust nature of the service sector.

However, caution is warranted against misconstruing its strength as a sign of overall economic health,” Dr. Aliyu warned.

He urges a dedicated commitment to the industrial sector, cautioning against viewing the service sector as superior, emphasizing the need for a balanced economic development strategy.

Former Chief Economist at Zenith Bank, Marcel Okeke expresses concerns about Nigeria’s economic standing, citing population growth outpacing economic growth and stressing the urgency of addressing fundamental issues, particularly insecurity.

Okeke questions the reported 2.54 per cent growth rate, cautioning against celebration and highlighting doubts about initiatives like the Anchor Borrowers’ Program.

“The figure falls significantly below the budget benchmark and is outpaced by population growth which poses a serious challenge to the country’s economic trajectory.”

He emphasizes the need for urgent and comprehensive solutions to avoid a prolonged recession and closures of manufacturing companies, calling for strategic attention to navigate complex challenges.

As concerns deepen, Okeke emphasized the need for urgent and comprehensive solutions.

He expressed worry that without addressing these challenges, the current recession may persist, leading to the closures of numerous companies in the manufacturing sector.

The road ahead for Nigeria’s economic development, according to Okeke, requires strategic and immediate attention to navigate the complex challenges.