Mixed fortunes in growing Nigeria’s GDP

from OKORO CHINEDU in Lagos, Nigeria
Nigeria Bureau
LAGOS – NIGERIA should consider a multifaceted approach in order to boost the growth of its gross domestic product (GDP).

This is the advice of analysts amid mixed fortunes experienced by some key sectors of the economy, as the new government of President Bola Tinubu settles in.

Chinwe Egim, chief economist at the Coronation Merchant Bank (CMB), said the approach should include fostering an enabling business environment through streamlined regulations, reduced bureaucracy and ease of starting and running businesses.

She said addressing these would stimulate entrepreneurship and investments.

“Furthermore, investing in human capital through education and skills development is vital for a more productive and innovative workforce,” Egim added.

Her sentiments come as the oil sector’s contribution to Nigeria’s GDP continues to diminish amid oil theft, vandalism and insecurity in the oil-producing areas of Africa’s largest economy.

Conversely, the non-oil economy is growing, driven by finance and insurance, telecoms, construction, trade, manufacturing and real estate.

According to the latest national accounts released by the National Bureau of Statistics (NBS), gross GDP grew by 2,5 percent year-on-year in the second quarter of 2023, compared to 3,5 percent y/y recorded in the corresponding period of 2022.

On a quarter-on-quarter basis, it contracted by 0,2 percent.

The oil economy contracted by 13,4 percent y/y in the second quarter of 2023.

This is comparable with 4,2 percent recorded in the previous quarter.

Meanwhile, the non-oil economy grew by 3,6% percent y/y compared with 2,8 percent y/y recorded in the previous quarter.

Over the past six quarters, the oil economy has contracted by an average of 15,3 percent.

Oil’s formal share of real GDP was 5,3 percent in second quarter 2023, which makes it the fifth largest sector in the economy after agriculture, trade, ICT and manufacturing.

Based on data from the NBS, average crude oil production in the period was 1,2 million barrels per day (mbpd) compared with 1,43 mbpd recorded in the first quarter 2023.

Nigeria has struggled to meet its Organisation of the Petroleum Exporting Countries (OPEC) quota of 1,7 mbpd.

The non-oil economy grew by 3,6% y/y in the second quarter 2023 compared with 2,8 percent y/y recorded in the previous.

The major drivers were finance and insurance, telecoms, construction, trade, manufacturing, and real estate.

Meanwhile, according to the most recent report on value-added-tax (VAT) from the NBS, the federation’s gross VAT collections for the second quarter increased by 10 percent quarter-on-quarter (q/q) and 30 percent y/y to N781 billion (US$1 billion).

The total VAT collection implies gross VAT collections of almost N1,5 trillion in the first half of 23, representing an increase of 25 percent y/y.

The manufacturing sector retained the top spot, with a total VAT contribution of N152 billion, representing 30 percent of domestic VAT collection and 19 percent.

FBN Quest said despite the improved outturn for VAT, economic activity across most sectors is sub-par.

“While ongoing efforts to improve collection efficiency are commendable, the government must intensify efforts to ensure that the macroeconomic environment is conducive enough for businesses to thrive,” it stated.

– CAJ News

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