President Muhammadu Buhari yesterday said that the real impact of the country exiting recession will be better felt when ordinary Nigerians experience a change in their living conditions.
The President’s reaction came as the Nigerian Economic Summit Group, Lagos Chamber of Commerce and Industry, LCCI and other stakeholders yesterday said that the economy is still performing below its potential and tied to the oil sector, in spite of the second quarter Gross Domestic Growth, GDP, report which indicated that the country is out of economic recession.
Speaking on the country’s exit from recession, President Buhari, who received the President of Niger, Alhaji Mahamadou Issoufou, at his country home in Daura, Katsina State, expressed excitement on the cheering news that the country is out of recession, adding that the real gains should be improved conditions for Nigerians.
In a statement signed by the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, the President, fielding questions from, newsmen said: “Certainly, I should be happy for what it is worth. I am looking forward to ensuring that ordinary Nigerian feels the impact.”
President Buhari commended all the managers of the economy for their hard work and commitment, stressing that more work needed to be done to improve the growth rate.
He also said: “Until coming out of recession translates into meaningful improvement in peoples’ lives, our work cannot be said to be done.”
Calling on the government to expedite action on implementation of the various measures designed to reform the economy, they insisted that the 0.55 per cent growth rate announced for the second quarter by the National Bureau of Statistics (NBS), though a good development, was marginal without any impact on the businesses and welfare of Nigerians.
Economy still fragile — FG
Meanwhile, the Federal Government stated that the Q2 GDP report shows that economic growth is fragile and vulnerable to shocks.
Special Adviser to the President on Economic Affairs, Dr. Adeyemi Dipeolu said in a statement that though the exit is a welcome development, the economic growth remained fragile and vulnerable to exogenous shocks or policy slippages.
Dipeolu in a statement signed by the Senior Special Assistant to the President on Media and Publicity, Office of the Vice President, Laolu Akande, said the growth in the Gross Domestic Product, GDP, called for cautious optimism, especially as inflation has continued to fall from 18.72% in January 2017 to 16.05% in July 2017.
He said: “Overall, the end of the recession is welcomed but economic growth remains fragile and vulnerable to exogenous shocks or policy slippages.
‘’Accordingly, it remains essential to intensify efforts going forward on the implementation of the ERGP to achieve desired outcomes including sustained inclusive growth, further diversification of the economy, creation of jobs and improved business conditions.”
Akande in the statement said that the President Mohammadu Buhari-led administration “welcomes news of Nigeria’s exit from recession with cautious optimism and will continue to drive Nigeria’s economic growth by vigorously implementing the Economic Recovery & Growth Plan launched earlier this year by President Muhammadu Buhari.”
The Special Adviser to the President on Economic Affairs while commenting on the economic performance of the country as published by the Bureau of Statistics for the Second Quarter of 2017 said: “The figures released by the National Bureau of Statistics for the second quarter of this year (Q2 2017) show that the economy grew in Q2 2017 by 0.55% from -0.91% in Q1 2017 and -1.49% in Q2 2016. This in effect means that the Nigerian economy has exited recession after five successive quarters of contraction.
“This positive growth is attributable to both the oil and non-oil sectors of the economy. Growth in the oil sector which has been negative since Q4 2015 was positive in Q2 2017. It rose by 1.64% as compared to -15.60 in Q1 2017, an increase of up to 17 percentage points.
‘’This improvement is partly due to the fact that oil prices which have improved slightly from the lows of last year have been relatively steady as well as the fact that production levels were being restored.”
On sectoral basis, he explained that, “The non-oil sector grew by 0.45% in Q2 2017, a second successive quarterly growth after growing 0.72% in Q1 2017. This increase which was not quite as strong as it was in Q2 2016 reflects continuing fragility of economic conditions. However, given that nearly 60% of the non-oil sectors contribution to GDP is influenced by the oil sector, growth in the oil sector will help boost the rest of the economy.
“The positive growth seen in agriculture when the rest of the economy was contracting was maintained at 3.01% which is encouraging especially if seasonal factors are taken into account. Manufacturing growth was also positive at 0.64% and although lower than the previous quarter’s growth of 1.36%, it was a noticeable improvement over the -3.36% experienced in Q2 2016 and a continuation of the turnaround of the sector. Solid minerals which remain a priority of the Administration also continued to grow and in Q2 2016 by 2.24%.
“Overall, industry as a whole grew by 1.45% in Q2 2017 after nine successive quarters of contraction starting in Q4 2014. This positive development was somewhat overshadowed by the continued decline in the services sector which accounts for 53.7% of GDP. Nevertheless, electricity and gas as well as financial institutions grew by 35.5% and 11.78% respectively in Q2 2017.
“The GDP figures give grounds for cautious optimism especially as inflation has continued to fall from 18.72% in January 2017 to 16.05% in July 2017. Foreign exchange reserves have similarly improved from a low of $24.53 in September 2016 to about $31 billion in August 2017. In the same vein capital importation grew by 95% year-on-year driven by portfolio and other investments but also notably by foreign direct investment which increased by almost 30% over the previous quarter.
“Foreign trade has also contributed to improving economic conditions with exports amounting to N3.1 trillion in Q2 2017 while imports which increased by 13.5% amounted to N2.5 trillion in the same period. The overall trade balance thus remained positive at N0.60 trillion.
“Unemployment however remains relatively high but job creation is expected to improve as businesses and employers increasingly respond more positively to the significantly improving business environment and favorable economic outlook.
“Besides, as key sectoral reforms in both oil and non-oil sectors gain traction, the successful implementation of ERGP initiatives such as N-Power and the social housing scheme will boost job creation.
“Food inflation also bears watching as it has remained quite high and volatile due mostly to high transport costs and seasonal factors such as the planting season. Investments in road and rail infrastructures, increased supply and availability of fertilizers and improvements in the business environment should contribute to the easing of food prices.”
Makarfi to Nigerians: Statistics is not reality
However, the Peoples Democratic Party described the Q2 GDP report as mere statistics that contradicts reality.
Reacting to the development, Peoples Democratic Party, PDP, urged Nigerians not to see every statistics as an indication of reality, following Tuesday’s report by the National Bureau of Statistics (NBS) that the nation has exited the economic recession that worsened living conditions in the past two years.
In an exclusive chat with Vanguard on the issue, Chairman, National Caretaker Committee of the PDP, Senator Ahmed Makarfi, said it was the wish of every Nigerian for the country to overcome the current hardship, warning however that statistics differs from reality.
“PDP is not praying for the country to be in recession. Statistics may indicate one thing, but reality is different,” he said.
Makarfi’s position is not out of tune with that of other Nigerians struggling to eke out a living in the past few years following the crash in the price of crude oil in the international market.
‘Economy running below par, still tied to oil’
Meanwhile, the Nigerian Economic Summit Group, Lagos Chamber of Commerce and Industry and other economic operators have said the economy was still performing below its potential and tied to the oil sector.
According to the NESG President, Mr. Bukar Kyari, “We just need to work on all the policy issues for example the Ease of Doing Business, so as to restore confidence in the economy. “We have to take it one step at a time because given the level of unemployment in the country, economic growth has to be in double digit before the impact can be felt.”
Director- General, Lagos Chamber of Commerce, LCCI, Mr. Muda Yusuf on his part said: “We are happy that technically, we are out of recession, and the advantage of this is that it has positive signal effects, especially to investors, that the economy is now recovering very well. The recovery can enhance the interests of investors in the Nigerian economy that we are now an economy that is out of recession.
“Second, it is also an indication that some of the policies that have been put in place by government are also having some positive impacts, and it could also be a pointer that investors’ confidence is also picking up gradually.
“So, those are the positive values that the news of our being out of recession brings, but if we talk about the operators in the economy, currently, it may not mean much; some of them may even feel that it’s an academic thing but what I think we should appreciate is that technically, we are out of recession.”
In his reaction, Managing Director/Chief Executive, Financial Derivatives Company Limited, Mr. Bismarck Rewane said that though the growth is marginal, returning to positive GDP growth is a major breakthrough but stressed that the Nigerian economy can do much better if more credit is extended to the private sector.
He said: “The impact is still marginal because your population is growing at 3 per cent and your GDP is growing at 0.5 per cent. In other words you are making 14,000 children every day, if we are to use the output to feed those children we will only be able to feed 3000 of those children. But what we are doing now is that we are taking from other children to feed those 14, 000 children.
“But to be honest with you, it is a major breakthrough that we are coming out of positive territory after five quarters of negative growth. But look at what has happened to South Africa. After two quarters of negative growth, they are back at 2.3 per cent.”
Exit from recession shows Buhari‘s working —Adesina
Also, Special Adviser to the President on Media and Publicity, Femi Adesina, said the cheering news that the country has exited from the economic recession that affected every facets of the economy was an indication that the government was active to its responsibilities to the citizenry.
Adesina, who stated this when he received a civil society group, Centre for Civil Society and Justice that was on a solidarity rally in Abuja, said for the country to exit recession was a clear testimony that President Muhammadu Buhari’s administration was working for the progress and prosperity of all Nigerians.
“That shows that we have a government that is working for us. We have a government that is interested in our welfare. We have a government that is interested in our well-being.
“Recession came due to some mistakes of the past and in just about a year, the government battled it and today we are officially out of recession and we give all glory to God.”
Nigeria’s fortune still dependent on oil – Capital market operators
According to operators in the nation’s capital market, the exit from recession in the second quarter of the year was in line with expectation given that there has been consistent reduction in contraction in the last three quarters.
They opined that growth in the financial services sector was as a result of rebound witnessed in the capital market as well as the high interest rate.
In his view, Mr. Johnson Chukwu, Managing Director/CEO, Cowry Asset Management Limited, said though the exit was expected, but the fortune of the country’s economy is still tied to the oil sector, which led the rebound in the GDP.
He said: “Some of us had actually predicted that Nigeria will come out of recession in the Q2 this year, which has actually come to pass given the improvement in the GDP. We saw the contraction reducing over the past three quarters.
So, we expected that given that the contraction was only 0.91 per cent in the first quarter and one of the things we have always emphasised is that if we can address the contraction in the oil and gas and mining sectors, we are going to see rebound in the economy and that is what happened.”
“If you look at the first quarter, the oil and gas sector contracted by 11.64 per cent. In the second quarter this year, it grew by 1.64 per cent. The oil and gas sector accounts for about nine per cent of the GDP, but not just accounting for nine per cent, it has a reflective impact on the GDP. It affects trade, manufacturing, virtually all the sectors because of the pass through effect of the oil sector viability.
“With the oil and gas sector rebounding to positive from negative growth, the overall national GDP actually increased by 0.55 per cent. So, you will want to say that the turnaround in the fortune of the economy was largely attributable to the oil and gas sector because the though the non-oil sector grew by 0.45 per cent but that growth was lower than the growth in the first quarter, which was actually 0.72 per cent.
“So, the non-oil sector grew in the first quarter at 0.72 per cent, but the oil sector contracted by 11.64 per cent, leading to an overall contraction in the GDP. This Q2’17, the non-oil sector grew by only 0.45 per cent, whereas the oil sector grew by 1.64 per cent, reducing the contraction of 11.64 per cent in the first quarter. So, the fortune of Nigeria’s economy can still be described as tied to the apron of the oil and gas sector,” Chukwu added.
He attributed the improvement in the financial services sector to the growth in the capital market, saying that unlike the previous quarter where the capital market recorded a negative growth, the rebound in Q2 help in lifting the financial services sector.
Also reacting, Mr. Dolapo Ashiru, Head, Stockbroking Services, Lead Capital Plc, a lot of the rebound has to do with the on-oil component of the GDP.
He, however, stated that the services component is not yet where it is supposed to be and advised the government to focus more on in the sector. “The rate of growth in the services sector is still low because the weak purchasing power of Nigerians,” he said.
On the contribution of the financial services sector to the GDP, he said: “Because of the high interest rate regime we saw that a lot of banks were very active in placements. They were very active in treasury operations and foreign transactions due to the liquidity in the foreign exchange, FX, market in the quarter.
Maritime operators insist economy still in recession
Operators in the maritime sector however dismissed the NBS Q2 GDP report insisting the country is still under recession.
The Deputy National President of the Chartered Institute of Logistics and Transport, CILT, Mr. Alban Igwe said that he had only received the NBS report and that he was still studying it.
Igwe explained that the statistical report is different from news; Nigerians will like to know what parameters were used in their assessment of the economy.
He said “We want to verify the parameters used, what has changed since Nigeria got out of recession.
‘We cannot take what the NBS has said hook, line, and stinker without asking questions as to the authenticity of the report”.
Similarly, the National President of the Association Nigerian Licensed Customs Agents, ANLCA, Prince Olayiwola Shittu described the report as propaganda by government adding that the Nigerians are reeling under recession.
“What indices did the NBS use in getting their findings and conclusion? How can they sit in the comfort of their offices and say Nigeria is out of recession when the opposite is the case?” he queried.
Shittu said that recession is very on and that Nigerians are stilling feeling the pang of it.
“Schools are resuming soon and I am sure that some children will not return back to school because their parents do not have money to pay their fees.”
On the contrary, the Executive Secretary of the Nigerian Shippers Council, NSC, Mr. Hassan Bello said that the NBS report was a welcome development as the economy is getting back on its feet.
Bello said that indicators have shown that there has been an increase in the rate of employment and decrease in the inflation adding that infrastructural provision by the government is ongoing.
He explained that Truck Transit Park, TPP, and the Inland Container Deport initiatives of government will further boost the economy as these projects will create more jobs opportunities for Nigerians.
Vetiva predicts 3% growth for Q3 GDP
Meanwhile analysts at Vetiva Capital Management Company Limited while commenting on the Q2 GDP report project 3.0 per cent growth for the third quarter of the economy.
They said: “Whilst the Nigerian economy should persist on a positive growth path for the rest of the year, we warn that most of the growth will be superficial, stemming from higher agriculture (from import substitution) and recovering oil output (from reduced militant activity). Stronger stimulus, preferably fiscal, is required to resuscitate consumption and propel medium-term growth. After accounting for the deviations from our estimates, we project 3.0% growth in Q3’17 (FY’17: 1.1% y/y), from 3.5% y/y previously, driven by downward revisions to all major non-oil sectors.” Vanguard
