On the Nigerian Economy and Its Emergence From Recession, By Uddin Ifeanyi

The moral behind this emergence tale, then, is that while the Nigerian economy may almost imperceptibly have lifted its index finger, it is still in intensive care. Where it may remain comatose without the requisite reforms. Fortunately, the fortunes of the information and communications sector are a morality tale of sorts.

The newspaper headlines have been largely celebratory. Still, “Nigeria emerges from recession” is the central theme ― in many instances with the reports in diverse publications looking like they had one editor. There was space, even, for political theatre. The All Progressives Congress (APC), the ruling party, did ditto the headlines. Beyond that, it could scarcely restrain itself, proceeding to claim that the economy’s “emergence” was further evidence of the Buhari administration’s fulfilment of its campaign promise.

So, what did the economy “emerge” from? The National Bureau of Statistics (NBS) reported last week that the economy grew in the final three months of last year. In the quarter to end-March 2020, the economy grew by 1.87 per cent on an annual basis. This was down on the 2.55 per cent rate by which the economy grew in the final quarter of 2019. As such, even before the COVID-19 pandemic, the economy’s fortunes may have turned for the worse.

What COVID-19 did, however…. No. Put properly, what the efforts by governments globally to contain the spread of the virus did, however, was to depress economic activity across the world. The non-pharmaceutical protocols (especially the lockdowns and the requirement for social distancing, most of which kicked in around February last year) hurt contact-intensive businesses. What tech and communications companies gained from more people having to work remotely was more than compensated for by the output losses in the hospitality, travel and tourism businesses.

In the end, just about every economy around the world saw output contractions in the second and third quarters of last year. Most economists are agreed that an economy is in recession when it suffers two back-to-back quarters of shrinking growth. In this sense, Nigeria was in good company ― except in its response to the problem. The combined monetary and fiscal stimulus that the Federal Government put in place last year to lend the economy a hand came in at about 0.3 per cent of GDP. A little under the 3 per cent average across emerging markets, and well below the 6 per cent averaged by developed economies.

This, therefore, will seem to be the campaign promise that the APC fulfilled: To keep the leaky boat of the Nigerian state afloat long enough for a rising tide to float it. In a much broader sense, this sentiment is present in the hurrahs being sang as global crude oil price rises.

Thanks to demand remaining supported by the latter spend, and expectations of a return to normalcy, as promising vaccine candidates began to appear, most economies dutifully saw growth inch up in the fourth quarter of last year. Indeed, in China’s case, by the fourth quarter, domestic output was nearly back to pre-pandemic levels.

This, therefore, will seem to be the campaign promise that the APC fulfilled: To keep the leaky boat of the Nigerian state afloat long enough for a rising tide to float it. In a much broader sense, this sentiment is present in the hurrahs being sang as global crude oil price rises. It has never mattered that we are marginal to the oil conversation. It is of no concern that the current price rally is the result of supply constraints, and not a recovery in demand. All that is important is that we should now see “accretions” to the gross external reserves.

Meanwhile, more than the fact of our emergence, the quality of this emergence should concern us. At issue here is not that the economy grew by only 0.11 per cent in the final quarter of last year. That’s troubling enough, when you consider that our population is still trudging along at a little under 3 per cent annually. A far bigger worry is that the trade sector (a proxy for consumer spending), which has been under water since the first quarter of 2019, continues to underperform. It shrank by 3.20 per cent in the three months to end-December 2020. In the 12 months ending December 2020, trade contracted by 8.49 per cent. With domestic demand likely to fall again this year ― as the manufacturing sector downsizes, the financial sector responds to a build up of dodgy loans, and agriculture is beset by the twin ills of worsening security and unstable climate patterns ― one can only worry for this sector’s near-term prospects.

…at the fourth quarter of last year, the oil sector put in a dreary performance. Thus, on the back of a daily average production of 1.56 million barrels per day, the oil sector shrank by 19.76 per cent year-on-year in the fourth quarter of last year, and by 8.89 per cent for 2020 as a whole.

Much of the positives in the economy’s outlook for this year ride on a pickup in global output growth, and through the trade sector, rising oil prices. But as at the fourth quarter of last year, the oil sector put in a dreary performance. Thus, on the back of a daily average production of 1.56 million barrels per day, the oil sector shrank by 19.76 per cent year-on-year in the fourth quarter of last year, and by 8.89 per cent for 2020 as a whole.

The moral behind this emergence tale, then, is that while the Nigerian economy may almost imperceptibly have lifted its index finger, it is still in intensive care. Where it may remain comatose without the requisite reforms. Fortunately, the fortunes of the information and communications sector are a morality tale of sorts. The sector has continued to grow since reforms at the turn of the century released its animal spirits ― including growing by 14.95 per cent in real terms, year-on-year ― in the final quarter of last year.

What are the lessons from this sector? Less government as provider. And more as regulator of a space where supply decisions are taking by private sector players.

Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.