Nigeria’s National Bureau of Statistics, NBS, released its latest figures of the Gross Domestic Product, GDP, signaling a growth in the second quarter from -1.5 percent in 2016 to 0.55 percent, and the country’s first step out of recession.
While this comes as good news for observers, experts have warned against premature celebrations, highlighting key areas where more effort must be put in to sustain the marginal growth.
For five consecutive quarters, Nigeria recorded negative growth owing to low oil prices which shrunk government revenue.
Speaking on Channels Tv’s Business Morning programme, CEO of Financial Derivatives Company, Bismark Rewane, tagged the latest figures as a “slow path to recovery”.
He noted that Nigeria’s population adds 14000 babies every day, and the current GDP only takes care of a mere 4000 of those. A growth rate of at least 3 percent per quarter will be required to begin recovery.
Statistician General of Nigeria, Dr. Yemi Kale said these are only baby steps, and recovery can only begin when Nigeria reclaims its best figure of 6.3 percent in 2014.
Rewane compared Nigeria to South Africa which also went into recession but now posts a 2.3 percent growth. He said consumption remains low and this is due to stagnation in disposable income and high unemployment level which stands at 35.2 percent.
He highlighted production, power, trade and the financial sectors as areas where the government needs to expend more effort to ensure that GDP growth is sustained.
Privatisation efforts in the power sector and the availability of foreign exchange as a result of improved oil exports has helped the trade sector record growth, albeit marginal at -3.08 percent.
For the financial sector, Rewane said lending to the government was responsible for the growth recorded there but noted that lending to the private sector must improve with lower interest rates.
He picked agriculture (3.39 percent), manufacturing (1.36 percent), real estate (3.10 percent) and construction (0.15 percent), as sectors that lending at low-interest rates should be targeted at.
“It is time to bring down interest rates, this is why our growth will be slow. While MPR is at 14 percent, treasury bill rate is still at 23 percent, and we must bring this down”.
Rewane said due to better performance from the Central Bank of Nigeria in the power sector, harvest season expected in the third quarter, Nigeria’s GDP is expected to maintain its growth.
Johnson Chukwu CEO, Cowry Asset Management received the news “emotionally uplifting” adding that things will only get better from here despite key indices of consumer activities and low-income levels remaining bleak.
Explaining the emotional part of the latest figures, he said when the recession began, every analyst was of the opinion that it would reverse, but investors pulled back because they saw that opportunities for wealth creation were non-existent, but now that the tide has turned, it gives investors the feeling that “if I invest in this economy the prospects that my investment will grow is better than when the economy is shrinking”.