• Negative Growth in Real Sector Contradicts Government’s GDP Numbers

Although the Presidency hailed the third quarter (Q3) Gross Domestic Product (GDP) report released by the National Bureau of Statistics (NBS) yesterday, a break-down indicates manufacturing, a critical sector of the economy, has actually suffered a setback.

The NBS disclosed that the GDP grew by 1.40 per cent, prompting the Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu, to remark: “The overall picture that emerges is that the economy is on the path of recovery. As inflation trends downwards, and with steady implementation of the Economic Recovery and Growth Plan (ERGP), real growth should soon be realised across all sectors in a mutually reinforcing manner.”

But despite manufacturing’s PMI rising to 55.0 points last month, indicating an expansion in the sector for the seventh consecutive month, the NBS data shows that the real GDP growth in the sector in Q3 was -2.85 per cent.

According to the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, the figure is a reflection of the serious setback suffered by the sector over the last couple of months, due to the challenges of foreign exchange, lack of infrastructure and non-availability of cheap working capital.

President of the Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, observed that, while the new growth figures are reassuring, “we must also be sure of the sources of the growth.”

He added that it would amount to “shortsightedness” to celebrate “just the numbers” when they were not realised by deliberate policies and actions of government.

According to Ajibola, “we must scrutinise the data. If the growth is fueled by oil and not non-oil sector, we are still at the same place and it is something to be cautious about.

For the Lagos-based economist, Bismarck Rewane, the growth is better than the earlier numbers, but “would not say whether or not it is a great feat for the country, as the battle for the return of the economy’s fundamentals remains` huge.”

Statistician General of the Federation, Dr. Yemi Kale had, in the report, insisted that the results also came from internationally-approved parameters like tax receipts from the Federal Inland Revenue Service (FIRS) and other administrative protocols.

United Kingdom-based urban and regional planner, Dr. Innocent Okpanum, described as ‘stunning’ and “impossible” the new Nigeria GDP figure figures.

“Elections are fast approaching, and NBS must have been asked to begin cooking up the GDP growth,” he said.

Okpanum’s position was re-echoed by another development economist, Mr. Odilim Enweagbara, who described the new numbers as “too good to be real, flying from a 0.55 per cent in Q2 to a miraculous level of 1.4 per cent.” Enweagbara insisted that the outcome might have been “politicised for electioneering gains.”

On a year-on-year basis, the GDP figure was higher than the same quarter of 2016 by 1.53 per cent and was -3.49 per cent points lower than the rate recorded in the preceding quarter. Also, growth rate of the sector on a quarter-on-quarter basis stands at 2.59 per cent. Real contribution of the sector to GDP in Q3 2017 is 8.81 per cent.

The NBS data was computed from 13 activities in the manufacturing sector: oil refining; cement; food, beverages and tobacco; textile, apparel and footwear; wood and wood products; pulp paper and paper products; chemical and pharmaceutical products; non-metallic products, plastic and rubber products; electrical and electronic, basic metal and iron and steel; motor vehicles and assembly; and other manufacturing.

Nominal GDP growth of manufacturing in Q3 2017 was 10.32 per cent (year-on-year), 13.25 per cent points higher than growth recorded in the corresponding period of 2016 (-2.93 per cent), but -5.65 per cent points lower than the preceding quarter growth of 15.97 per cent. Quarter-on-quarter growth of the sector was 3.21 per cent.

The contribution of manufacturing to nominal GDP in the current quarter was 8.55 per cent, lower than figures recorded in the corresponding period of 2016 at 8.60 per cent and for the second quarter of 2017 at 9.02 per cent.

“The availability of foreign exchange has aided the expansion of the PMI. GDP and overall performance is more than just purchasing. It is also about the purchasing power of consumers and cost of operations. All these factors affect the overall performance of the sector and they are yet to be in a positive position. Hence, the negative GDP growth recorded,” added Yusuf.

Speaking further on the NBS report, Dipeolu said: “This is a steady continuation of the positive growth of 0.55 per cent (now revised to 0.72 per cent) experienced in Q2 2017 and reinforces the exit from the 2016 recession. The positive growth in Q3 is consistent with the improvements in other indicators. Foreign exchange reserves have risen to nearly $34 billion while stock market and Purchasing Managers’ Indices (PMI) have also been positive.

“The naira exchange rate has stabilised while inflation has declined to 15.91 per cent from 18.7 in January 2017. While inflation is not declining as fast as desirable, it is approaching the estimated target of 15.74 per cent for the year in the ERGP. Agricultural growth was 3.06 per cent in the third quarter of 2017, maintaining the positive growth of the sector, even when there was a slow-down in the rest of the economy.”

He added: “The industrial sector grew at 8.83 per cent, mostly due to mining and quarrying. The oil sector grew very strongly as forecast in the ERGP and partly as a result of the policy actions in the plan to restore growth in the sector. The service sector is yet to recover but should soon begin to be positively affected by the improvements in the real economy and the effects of the dedicated and focused capital spending of over N1.2 trillion on infrastructure by the Federal Government.

“It is expected that the economy will continue to grow given these developments and the reform, and improvements in the business environment shown by the upward movement of 24 places in the recently released World Bank’s Ease of Doing Business Ranking, which was better than the target of 20 places specified in the ERGP.”

According to the NBS, the 1.40 per cent GDP growth in Q3 is 3.74 per cent higher than the rate recorded in the corresponding quarter of 2016, which indicated –2.34 per cent and higher by 0.68 per cent points from the rate recorded in the preceding quarter, which was revised to 0.72 per cent from 0.55 per cent. Quarter on quarter, real GDP growth was 8.97 per cent. Year-to-date real GDP growth stands at 0.43 percent.