…the truth is that tepid global economic growth, a Chinese economy that is increasingly as dependable as a reveller with a bad hangover, and the effects of American tariffs, will keep oil prices (the economy’s blood supply) low for some time to come. The near- to medium-term outlook for the Nigerian economy are not half as good as the recent output numbers suggest.
Set against the Tinubu government’s goal of building a US$1 trillion economy by 2030, the GDP numbers released recently by the National Bureau of Statistics (NBS) do not give cause for cheer. What are the causes for concern? The fact that last quarter’s aggregate growth rate is nowhere near the minimum annual growth rate of 7 per cent by 2027 that the achievement of the government’s goal calls for is one such. Then, again, the goal had a Panglossian ring to it from the get-go. But simply acknowledging that the Nigerian policy landscape is littered with the unsightly remains of similar well-intended, and high-sounding targets is bothersome enough.
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The worries go deeper than these, though. How, to take the most immediately obvious of these: Can agriculture — rain-fed, and subsistence — be one of the biggest drivers of any economy’s (not to talk of one with our aspirations) growth? This is both a structural challenge (back to that later), and an anecdotal one. Aridification is a growing problem in the country’s savannah belt; it has long since become, in this sense, a big driver of the heightened tension between farmers and pastoralists in the nation’s main food producing areas. Add to this, the harm to communities in the country’s famed breadbasket from the activities of heavily armed non-state actors. And you cannot but ask how our farming communities have managed to sustain crop production at the levels that are driving current output in the agriculture sector. More likely, though, is that agriculture’s large share in our aggregate output numbers simply reflects many people producing for private consumption, rather than high-value commercial output. In which case, the 3.79 per cent real growth that the sector recorded last quarter mostly reflects seasonal harvest variation, rather than gains in productivity.
The implications of these for manufacturing speak to the economy’s structural challenges, and they are dismal, if not largely to be expected. Self-evidently, domestic supply lines from agriculture to agro-processors (food, beverages, textiles) are weedy. One explanation for the manufacturing sector’s low real growth and low share of domestic output is that an import-dependent processing system continues to struggle to absorb farm output. But this is not all there is. By the mid-1970s, the Nigerian economy was already being squeezed by two pincers: an agriculture sector with falling levels of productivity on one hand, and a manufacturing sector with shrinking connections to agriculture, on the other. The resulting problem has been twofold. First, it has meant that surplus labour in the countryside has not been able to move as easily to productive manufacturing jobs in the cities as it happened in other rapidly industrialising economies. Albeit new anecdotal evidence abounds of rural labour finding work outlet in the gig economy. Consequently, aggregate demand for domestically produced manufactured goods has remained pinched.
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…the relatively healthy performance of the finance and insurance sector is both cause for cheer and concern. The concern, first. Worries about how this sector might do well, despite the struggles of the real sectors of the economy are readily met by pointing to the insurgence of the services sector. Arguably, digital payments and mobile wallets have been buoyed by the expansion of services and telecoms.
To the subsequent mismatch of workers’ skills and capital, include the ever-present constraints to supply faced by manufacturing, including from unreliable energy, high input costs, foreign exchange shortages, and expensive logistics, and you get a sense of the misgivings around the output numbers.
On this score, the relatively healthy performance of the finance and insurance sector is both cause for cheer and concern. The concern, first. Worries about how this sector might do well, despite the struggles of the real sectors of the economy are readily met by pointing to the insurgence of the services sector. Arguably, digital payments and mobile wallets have been buoyed by the expansion of services and telecoms. Accordingly, transaction volumes and fee incomes have risen, even if the real economy is thin. Banks, on the other hand, are generating large nominal returns through investments in government securities, foreign exchange trading, and short-term asset accumulation. Put differently, the finance sector has become a rentier mechanism, raising its size but not contributing to inclusive job-creating growth.
A clearer picture of the economy’s state is critical for the design of public policy responses. Especially for a government whose budget estimates that’s dependent on the global oil market has turned wonky. The Organisation of the Petroleum Exporting Countries’ (OPEC) outlook (bullish) for oil has not been this far away from that of the International Energy Agency’s in years.
And then there is the small matter of the inflation numbers. True, the NBS’ consumer price index was always about the all-in costs of the average person on the street. But even for this stylised representative, since the new inflation series commenced this year, a chasm appears to have opened between the figures put out by our official bean counters and every Tunde, Okoro, and Muhammad’s sense of the size of the hole dug by domestic price movements in their wallets.
A clearer picture of the economy’s state is critical for the design of public policy responses. Especially for a government whose budget estimates that’s dependent on the global oil market has turned wonky. The Organisation of the Petroleum Exporting Countries’ (OPEC) outlook (bullish) for oil has not been this far away from that of the International Energy Agency’s in years. But the truth is that tepid global economic growth, a Chinese economy that is increasingly as dependable as a reveller with a bad hangover, and the effects of American tariffs, will keep oil prices (the economy’s blood supply) low for some time to come. The near- to medium-term outlook for the Nigerian economy are not half as good as the recent output numbers suggest.
Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.
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