The immediate post-recession period when the fundamentals of the economy are at the early stages of recovery is the best time to invest in Nigeria, the director general, National Bureau of Statistics (NBS), Yemi Kale, has said.
Mr Kale, who was speaking at the “Direct Investors’ Summit Nigeria’ organised by the Nigerian Investment Promotion Commission (NIPC) in Abuja on Wednesday, also said the primary reason the country’s economy went into recession in 2016 was the crash in global oil prices in 2014.
Latest data on the economy released on Monday by the statistics agency showed gross domestic product (GDP) growth improved consistently since the third quarter of 2016 from -2.34 per cent to about 2.11 per cent in the fourth quarter of 2017.
Although the rate slipped marginally by 0.83 per cent from the level attained in the last quarter of 2017, it remained in the positive zone in the first quarter of 2018 with a rate of 1.95 per cent.
Also, inflation has declined for 15 consecutive months from a high of 18.72 per cent in January 2017 to a two-year low of 12.48 per cent in April, within the target set in the Economic Recovery and Growth Plan (ERGP).
Trade balance and balance of payments have remained positive, while exchange rates have been stable, with foreign reserves at about $48 billion as at May 18.
Besides, capital importation in 2018 has maintained the increasing trend set in 2017 over 2016, with inflows at over 500 per cent higher than in the first quarter of this year.
“As these signs of recovery have emerged, foreign investment flows have started to return,” Mr Kale, noted.
“In Q3 2017 when the country’s exit from recession was announced, significant portfolio investment inflow was immediately recorded. It is a clear vote of confidence in the Nigerian economy post-recession that capital inflows have returned to 2014 levels.”
The DG, who is also the Statistician General of the Federation, said these improving indices have helped to restore investors’ confidence in the economic management process, while the various reforms being implemented would ensure the economy continues on a more sustainable path from recovery.
“These reforms are aimed at improving the business environment, simplifying tax administration, facilitating one-stop investment destinations, improving port operations.
“The best time to invest is now, when our economy, whose good fundamentals haven’t changed, is on at the early stages of recovery,” he said.
On how the economy went into recension, Mr Kale blamed it on the inability of the economy to withstand the low revenue stream as a result of the crash in global oil prices in 2014.
He said although the country’s economy rests on three main pillars, including the oil sector, “an import significant consumption-driven non-oil sector” and “an Investment-driven, non-oil sector,” the first pillar was the most dominant.
Despite contributing only about 10 per cent to the country’s economy, Mr Kale said the oil sector accounts for about 80 per cent of total government revenue for development and 95 per cent of foreign exchange.
The consumption-driven non-oil sector, which account for 52 per cent contributions to the economy relies on the oil sector for foreign exchange and other capital inflows to finance imports of intermediate/finished goods.
It also relies on the sector for funding for imported services to meet domestic demand in manufacturing, real estate public administration, trade, construction and financial services.
On the other hand, the investment-driven non-oil sector, which accounts for about 39 per cent direct and indirect contribution to the economy, he said at does not rely on the oil sector or on foreign exchange remittances for agriculture, arts & entertainment, administration, support services and some manufacturing.
Rather he said the sector harnesses local inputs of raw materials, intermediate goods and domestic labour as factors of production to meet domestic demand as well as exports.
While the first two pillars (or 61 per cent of the economy) depend on the unpredictable and volatile international crude oil prices and the peace in the Niger Delta region, the third pillar (or 39 per cent of the economy) depends on issues of security, ease of business, weather and (good or bad) policy decisions.
“All these mean, in reality, that the Nigerian economy is 61 per cent directly and indirectly dependent on crude oil,” he noted.
“This means, we have essentially been building our house (economy) on one pillar, supported by two other shaky, but more dominant pillars that we did not have control of.
“As long as the main oil sector pillar remained firm, our house (economy) continued to stand. But once that pillar became unstable, shaken by the developments in the global economy that are beyond our control, the house was prone to collapse.
“This was primarily why the economy could not withstand the low revenue stream that prevailed when oil prices crashed in 2014,” Mr Kale said.
The Executive Secretary of NIPC, Yewande Sadiku, said the theme of the summit was “Investment meets opportunities!”.
She said it was organised to provide opportunity for prospective investors to showcase their comparative and competitive advantages to foster development and growth.