GDP: Nigerian economy yet to recover from 2016 recession, says LCCI

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Following the marginal improvement in Nigeria’s output performance as a result of the Gross Domestic Product (GDP) growth which saw the economy grew by 2.27% compared to 1.91% recorded in 2018, the Lagos Chamber of Commerce and Industry (LCCI) has said that the assessment of realities in the macroeconomic environment suggests that the economy is yet to recover from the 2016 recession.

The Director General of LCCI, Dr. Muda Yusuf who made this declaration in a statement he issued in Lagos on Sunday pointed out that Growth was still sluggish and weak to create employment opportunities for the fast-growing population and lift millions of Nigerians out of poverty.

He however noted that “The growth in the year 2019 was largely driven by the following sectors: Oil sector: This sector grew at a faster pace of 4.59% in 2019, from 0.97% in 2018. This was driven by increased average daily crude production of 2.01 million barrels in 2019 compared with 1.92 million barrels in 2018, as well as favourable oil prices (which averaged at about $64 per barrel in 2019).

“ICT: ICT sector grew by 11.08% in 2019 compared to 9.65% in 2018. Growth in the ICT sector was driven by telecommunication and information services sub-sector, which rose by 11.33% and 11.41% in 2018 and 2019 respectively. The rapid growth of the ICT sector can be attributed to increased investment in fintech space, expanded e-commerce and diverse innovations in the use of ICT across sectors.

“Agriculture: The sector grew by 2.36% in 2019 as against 2.12% in 2018. Growth of the sector was powered by crop production, which accounts for over 85% of productivity in the sector. On quarterly basis, agriculture expanded by 2.28% and 2.31% in the third and final quarter of 2019, which was supported by the sustained intervention of the Central Bank of Nigeria and positive impact of land border closure.

“Arts, Entertainment & Recreation: This sector grew by 4.12% in 2019 as against 2.53% in 2018. The improved growth was buoyed by creative industry players in the sector, favourable demographics and low infrastructure demand.”

He continued, “We note that the performance of key sectors that has the capacity to facilitate economic diversification was still largely constrained. We highlight the sectors as follows: Manufacturing: The sector grew at a slower pace of 0.77% in 2019 as against 2.09% in 2018. Growth of the sector was heavily weighed down by the oil refining subsector which slumped by 32% in 2019. Despite being the biggest beneficiary of CBN’s push for credit flows into the real economy, productivity in the manufacturing sector continues to be challenged by tough operating environment, poor infrastructure and unpredictability of government policies.

“Agriculture sector recorded a modest growth of 2.36% in 2019 compared with 2.12% in 2018. Agriculture productivity is threatened by insecurity issues in the food-producing region, notably farmers-herders tension in the Middle Belt, poor road and railway network and adoption of outdated farming methods by small scale farmers. This has led to low agricultural yields.

“Trade sector remained in recession in 2019, as it contracted by 0.63% and 0.38% in 2018 and 2019 respectively. The suboptimal performance of trade could be attributed to border closure, high inflation, which affects purchasing power, foreign exchange exclusion policies, poor domestic connectivity and security issues.

“Real estate maintained its negative growth trajectory in 2019, contracting by 4.74% and 2.36% in 2018 and 2019 respectively. Real estate is a critical sector considering its employment-generating capacity. However, the absence of effective mortgage finance system, high cost of building materials, absence of long-term funds, infrastructure issues and weak macroeconomic fundamentals are major downside risks to performance of the sector.”

Yusuf therefore harped on the need for government to embrace structural, policy and regulatory reforms to unlock the huge growth potentials in the economy.

He listed the areas government should focus attention on to so as to boost the economy to include; agriculture, manufacturing, trade and real estate.

In the area of agriculture, the DG listed areas of intervention to boost the sector include; need for agricultural mechanization as over 70% of farmers in Nigeria operate on a small scale, need to support the sector with seedlings, development of rural infrastructure, provision of modern farm equipment at subsidized rates and ensuring linkage between agriculture and industry.

On manufacturing, he listed the areas of intervention to include; need to fix power challenges to reduce cost and enhance competitiveness, ensuring patronage of locally produced items, curbing smuggling and dumping as well as urgent need to reform port processes and ensure better port infrastructure.

On trade, Dr. Yusuf made case for the need to improve domestic connectivity through better transportation infrastructure, easing of cargo clearing process, promotion of economic integration at the sub-regional and continental levels, easing cross-border trade challenges and need for Nigerian Customs to prioritize trade facilitation over revenue generation.

He further listed areas of intervention in the real estate sector to include; need to create an effective mortgage finance system with single digit interest rate, creation of long-term pool of funds to finance the sector, easing the challenges of land documentation and perfection of land titles as well as review of import tariffs on some critical building materials in which there is limited local production capacity.

Photo: Director General of LCCI, Dr. Muda Yusuf.

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