- Low GDP Increases Nigeria’s Risk, Says FSDH
The low growth rate of the real Gross Domestic Product (GDP) may stifle credit creation and increase the risk of doing business in Nigeria.
In its latest review, investment banking group – FSDH Merchant Bank stated that Nigeria’s real GDP growth rate of 1.50 per cent recorded in second quarter 2018 was below the expectations of most analysts.
FSDH noted that the GDP rate reflects the impact of the rising uncertainties in the country as the low growth and contraction across many sectors of the economy underscore the need for an urgent set of policies and engagements to rescue the economy.
“The current low GDP growth rate is not strong enough to stimulate credit creation. It has also increased the risk of doing business in Nigeria. Therefore, urgent measures are required so that low GDP growth rate does not become a new norm in Nigeria,” FSDH stated.
According to the investment banking group, although the fragile growth was driven by the non-oil sector, the fact that dominant sectors of the economy either recorded low growth or contracted in second quarter 2018 indicated that urgent actions are required.
FSDH pointed out that the slow growth of 1.19 per cent in the agriculture sector, if not checked, may lead to food shortage in the country and consequently escalating food prices and rising inflation rate. Agriculture is the largest sector of the economy and accounts for 22.86 per cent.
The trade sector, which is the second largest sector of the economy entered a recession in second quarter 2018.
The weak purchasing power, occasioned by non-payment of salaries, high unemployment rate and high consumer prices, is responsible for the contraction in the trade sector.