With latest National Bureau of Statistics (NBS) gross domestic product (GDP) report showing the country’s economic growth declined –0.45 per cent points from 1.95 per cent in the first quarter to about 1.5 per cent in the second quarter, investment and financial experts have given reasons for the development.
In the report released on Monday in Abuja, the NBS said year-on-year GDP in real terms stood at about N16.58 trillion, with growth in the second quarter recording a marginal increase of 0.79 per cent points higher when compared to 0.72 per cent in the corresponding period in 2017.
Aggregate GDP stood at N30.69 trillion in nominal terms, representing a 7.85 per cent increase in nominal GDP when compared to the preceding quarter figure of N28.46 trillion, or 13.57 per cent.
Mixed Bag Of Issues, Concerns
Economic experts who spoke on a Channels TV programme on Tuesday attributed the decline in the economy to a ”mixed bag of developments in the oil and non-oil sectors”.
For Bayo Rotimi, a financial consultant, although the services sector, namely ICT, agriculture, manufacturing and solid minerals, led the marginal growth in the non-oil sector, there are concerns government needs to redress.
“What the statistics show is that our economy is still over-dependent on oil,” he said. “Between the first and second quarters, oil sector GDP growth declined by 18.71 per cent as a result of a drop in crude oil production from two million barrels to 1.64 million barrels per day.
“At a time of increasing crude oil price at the international market, the loss translates to about $1.1 billion on the average.”
Oil sector GDP contracted to about -3.95 per cent, compared to about 14.77 per cent in the first quarter and 3.53 per cent in the corresponding period in 2017.
In Mr Rotimi’s view, if the oil sector, as the principal driver of the economy was struggling during the period under review, amid rising crude oil price at the international market, ”it was obvious the production elements in the industry were yet to be sorted out”.
He said it should be of serious concern to Nigerians, particularly policy and decision makers that at a time the country was facing less disruptions in oil operations as a result of attacks on oil facilities in the Niger Delta, oil production and exports dropped.
Although the production estimates in the 2018 budget targeted 2.3 million barrels a day, about two million barrels was realised in the first quarter, against 1.64 million barrels a day in the second.
He blamed the lull in activities in the sector to the pall of uncertainty in the regulatory framework, with the petroleum industry governance bill (PIGB) still pending assent with the president since the harmonised copy was sent by the National Assembly on June 8.
The PIGB is one of four parts of the proposed Petroleum Industry Bill (PIB) seeking to update and replace the outdated petroleum industry law with a more comprehensive provisions.
The other draft bills include the Petroleum Industry Administration Bill (PIAB), Petroleum Industry Fiscal Bill (PIFB) and Petroleum Host and Impacted Communities Bill (PHICB).
Recently, the international oil companies (IOCs) said new investments in the oil and gas sector would wait till the uncertainties associated with the absence of acceptable financial and operational terms were sorted out.
Consequently, the consultant said getting the policies and politics right was critical for the situation to turn around.
“The critical actors in the political space have to forgo their selfish interests and think about the nation. The present political tension and confusion are not helping anybody.
“From January till date, the Nigerian stock market has lost over N2 trillion in capitalisation as a result of the escalating political tension, which is not helping the economy,” he noted.
He called for the overhaul of the process to boost growth in the agricultural sector.
Apart from lack of access to credit, he said the security of farmers, as a result of the herdsmen-farmers crisis was the major reason for the decline in the agricultural sector, despite the various interventionist schemes by various government agencies.
If the critical sectors like agriculture, manufacturing and solid minerals, that should drive non-oil activities are experiencing decline, he said, ”the assumption could be that most government rhetoric about diversification was not backed up with tangible policies to kick-start growth”.
For a way out, Mr Rotimi asked government to review its policies and create a more conducive environment on security, policy, access to finance and capacity building for operators.
“Apart from creating environment to encourage private sector participation and economic growth. government alone cannot provide all the infrastructure required to grow the economy. Nigeria’s economy need to be growing at the rate of 7 to 10 per cent for several years on a consistent basis for the people to feel the impact.
“Government should get the politics right to attract local and foreign investors; ensure rule of law and security. It should overhaul and restructure development frameworks for institutional reforms. We cannot continue to lose over N1trillion on subsidy on petroleum products. NNPC must be made to be accountable.”
An investment consultant, Ogbonna Ukuku, who also featured on the programme, stressed the need for constant interaction between all sectors for the economy to grow.
Mr Ukuku noted that a situation where state governments refuse to buy into policy initiatives at the centre was not helping growth.
“If the state governments are not flowing with the federal, not much result should be expected in the economy,” he said.
He said the privatisation policy in the power sector by previous administrations was a ‘time bomb that just exploded in the face of the present administration”, with most operators in the sector failing to deliver on their mandates.
“Cancelling all the contracts to the current owners of the power plants will result in a lot of litigations and total breakdown in the economy.
“If the operators are returning the 60 per cent equity in the power companies, the federal government should not buy back. Rather, it should look for competent private sector operators with technical and financial capacity to run the sector,” he said
The consultant also criticised the government’s decision to sell such strategic infrastructure to private individuals and continue to provide intervention financial support.