NBS Q4 2020 report on recession exit elicits divergent reactions

*Economy still in bad shape, says economist

*Nigeria’s annual contraction exceeds World Bank’s, IMF’s 4.1% projection


Finance and industry experts have expressed divergent views over the National Bureau of Statistics (NBS) report that says Nigeria’s Gross Domestic Product (GDP) grew by 0.11 percent in Quarter Four (Q4) 2020, from the 6.11 percent contraction in Q3, signaling a gradual recovery from recession.

NBS in its latest economic report released on Thursday said new figures represented the first positive quarterly growth in the last three quarters.

According to the bureau, though weak, the positive growth reflects the gradual return of economic activities following the easing of restricted movements and limited local and international commercial activities in the preceding quarters.

“As a result, while the Q4 2020 growth rate was lower than the growth rate recorded the previous year by –2.44 percent, it was higher by 3.74 percent compared to Q3 2020.

“On a quarter-on-quarter basis, real GDP growth was 9.68 percent indicating a second positive consecutive quarter-on-quarter real growth rate in 2020, after two negative quarters,” the report noted.

The NBS said overall, in 2020, the annual growth of real GDP was estimated at –1.92 percent, a decline of –4.20 percent when compared to 2.27 percent recorded in 2019.

But while commenting on this development, Director-General of Lagos Chamber of Commerce & Industry (LCCI), Dr. Muda Yusuf, noted that the improvement in quarterly output performance as real GDP growth rose by 0.11 percent in Q4-2020, compared to 3.62 percent contraction in the preceding quarter.

He stated that the quarterly performance was a pleasant surprise, saying, the economy ended the year 2020 in a negative growth region, with annual GDP growth declining by 1.92 percent, its lowest level since 1994. 

According to Yusuf, in our 2021 economic outlook report, we posited that the annual real GDP growth rate would range between -two percent and -one percent. 

“Meanwhile, the magnitude of annual contraction in 2020 exceeded the World Bank and International Monetary Fund (IMF)’s projection of 4.1 percent and 3.2 percent, respectively. The Lagos Chamber believes output contraction recorded in the year 2020 further highlights the country’s weak macroeconomic fundamentals and the persistent, structural, policy, and regulatory issues in the economy.

“Apart from declining growth, the economy is currently confronted with several challenges, including rising consumer prices (inflation now at a 45-month high of 16.47 percent in January 2021), weak employment level, persisting liquidity concerns in the foreign exchange market, high poverty incidence, weak investor confidence, and insecurity, among others. These challenges which had been part of the country’s economic narrative prior to the pandemic were amplified by the COVID-19 induced disruptions,” he pointed out.

While acknowledging the  Central Bank’s accommodative policy disposition in the year 2020, evidenced by its sustained developmental finance efforts and deliberate interest rate reduction, he added that ‘on the other hand, we also acknowledge the efforts by fiscal authorities in quickening recovery via the Economic Sustainability Plan.’

However, the stimulus provided by fiscal and monetary authorities (c.3 percent of GDP), he said, was largely insufficient to achieve desired outcomes even as policy responses failed to address the structural challenges stifling productivity across sectors.

Speaking on 2021 Growth Outlook, the DG of LCCI said: “The current downturn is expected to be short-lived going forward. There are indications that recovery might be faster than expected however the pace of recovery is expected to be subdued within the region of one and two percent.

“Projections by the World Bank and IMF put Nigeria’s annual average growth for the year 2021 at 1.1 percent and 1.5 percent, respectively.”

 Also, an economist and former Director-General of the West African Institute for Financial and Economic Management (WAIFEM), Professor Akpan Ekpo, noted that the growth recorded was rather too sluggish.

Expo, who is also the chairman of the Foundation for Economic Research and Training said: “it is a very sluggish Q4 recovery but it shows signs that perhaps the reforms put in place have started having an effect. For the year, the economy grew at -1.98 percent so we are still in recession and so we are getting out of it slowly but it is very negligible.”

For Professor Ekpo, the growth recorded still reflects an economy in a bad shape as he said “when you look at the figures again, the oil sector contracted so it is not doing well and the non-oil sector is also not doing well. So, we just barely escaped the contraction in Q4 because of increased government spending on the economy.

“If you combine that with the rising inflation rate especially food inflation, then the economy is not really doing well, it is in bad shape. With an inflation rate of close to 17 percent, food inflation of over 20 percent. We should not be celebrating any sluggish recovery.

“Combining the inflation rate and food inflation as well as rising unemployment then the economy is in bad shape because it shows that the misery index is still rising and there is no cause for celebration.”

To ensure that the country sees the kind of growth it expects in the post-Covid-19 era, he said: “all these hikes in petrol prices, hike in tariff have to wait and since the oil price is going up, it means the government is getting more revenue so they should use that revenue.

Analysts at Cowry Asset Management Limited said in the last quarter of 2020, Nigeria exited its recession having printed a year-on-year (y-o-y) real output the growth rate of 0.11 percent to N19.55 trillion (or $122.44 billion) as lockdown measures were significantly eased, allowing households and business to resume economic activities, and in spite of the anti-SARS protests in several parts of the country.

According to Cowry, this is in addition to the several billions of naira in economic stimulus packages provided by the monetary and fiscal authorities to help households and businesses cope with the ravaging effect of COVID-19.

It noted that sector-wise, the exit was propelled essentially by a 1.69 percent growth in the non-oil sector; with Information & Communication, Agricultural and Real Estate sectors registering the biggest growth rates of 14.95 percent, 3.42 percent, and 2.81 percent respectively.

It stated that “in line with our expectation, Nigeria’s economy remains well on track to see a convincing recovery amid a return to economic activities, the administration of the COVID-19 vaccine, strong crude oil prices, and the numerous stimulus packages. We nevertheless expect the Nigerian authorities to take necessary measures to strengthen the fragile recovery.”

Meanwhile, the bureau in the new report explained that the quarter under review, aggregate GDP stood at N43.564 billion in nominal terms.

This performance, the bureau said was higher when compared to Q4 2019, which recorded a GDP aggregate of N39.577 billion, representing a year-on-year nominal growth rate of 10.07 percent.

The NBS classified the Nigerian economy into the oil and non-oil sectors.

For the oil sector, in Q4, average daily oil production of 1.56 million barrels per day (mbd) was recorded.

This was lower than the daily average production of 2.00 Mbps recorded in the same quarter of 2019 by -0.44 Mbps and Q3 2020 by –0.11 Mbps.

It added that the real growth of the oil sector was –19.76 percent (year-on-year) in Q4 indicating a decrease by –26.12 percent relative to the rate recorded in the corresponding quarter of 2019.

“Growth decreased by –5.87 percent when compared to Q3 2020, while quarter-on-quarter, the oil sector recorded a growth rate of –26.27 percent in Q4.

“For 2020, the oil sector grew at –8.89 percent compared to 4.59 percent in 2019,” the report stated.

It added that the oil sector contributed 5.87 percent to total real GDP in Q4, down from the corresponding period of 2019 and the preceding quarter, where it contributed 7.32 percent and 8.73 percent respectively.

The nation’s non-oil sector grew by 1.69 percent in real terms in Q4 2020, slower than the 2.26 percent recorded in the corresponding quarter of 2019, the NBS said.

It, however, said it was better than the –2.51 percent growth rate recorded in the preceding quarter.

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