Nigeria, like every other financial system, possibly climbing out of the deep gap. Nothing understates this higher than the current restoration within the transport sector, which noticed a year-on-year (YoY) leap of 76.8 per cent within the final quarter (Q2 2021) as towards -49 per cent progress it posted final yr Q2.
The financial system, throughout sectors, faltered final yr for apparent causes. There was a world shutdown to comprise the unfold of the COVID-19 pandemic, and as anticipated, the logistics sector, together with transportation, took the primary blow.
And within the phrases of Prof. Samuel Odewumi, a member of the transport college of the Lagos State College (LASu), “a vibrant transport is the primary signal of a recovering financial system”. Like transport, like commerce. From a deep dive in Q2 2020, actions within the sector noticed double-digit progress final quarter.
Certainly, the gross home product (GDP) progress information for Q2 2021 launched final week did break a six-year report. The 5.01 per cent YoY progress was roughly twice as excessive as every other quarterly efficiency since 2015 when President Muhammadu Buhari’s administration took over the nationwide financial system.
The leg-up efficiency got here two quarters after the nation exited one of many deepest however shortest recessions in its historical past. The financial system caved in by as a lot -6.1 per cent in Q2 2020, which was adopted by one other -3.62 per cent in Q3 2020, main finally to a recession, the second within the life of the present administration.
However as predicted, the hollowing expertise was short-lived because the nation exited the recession narrowly within the final quarter (This fall 2020). There have been debates as as to whether the financial system might bounce again instantly or undergo a painful U-recovery, which might expose the nation to essentially the most dreaded melancholy.
It’s on this context that the current GDP information imply greater than mere statistics to the market and policymakers. Besides weighed towards the bottom impact of the lull of Q2 2020 efficiency, which they’re in contrast with, the flashy information might idiot Nigerians and probably downplay the truth that the nation is just midway out of the deep gap it was in all through final yr.
In fact, related ministries, departments and businesses (MDAs) have taken to completely different media platforms to have fun the “spectacular efficiency”. However it’s related to interrogate the figures. Can the nation replicate an identical efficiency within the close to time period? Do the figures signify actual progress or the continued celebration is a traditional case of damaged window fallacy?
A significant motive the 5 per cent progress doesn’t imply the financial system is out of the woods comes from how proportion adjustments work once they oscillate between optimistic and destructive areas. When an asset is priced at N100 million and it falls by 20 per cent, its new worth is N80 million. If it regains 20 per cent, its new worth is just not N100 million however N96 million; the acquire is N16 million. It thus signifies that the asset would wish to develop by the next proportion to erase the earlier losses.
A employee whose wage was diminished by, say 10 per cent, throughout final yr’s lockdown would additionally want greater than a ten per cent top-up on the brand new pay cheque to regain the unique revenue worth, supposing she has no different sources of livelihood.
In the identical vein, when GDP falls by a sure proportion, it requires the next proportion progress to return the financial system to its earlier dimension. By implication, Nigerian’s GDP merely reclaimed what it misplaced to COVID-19 final yr’s Q2.
By way of absolute figures, the distinction between the financial worth of the nation’s whole manufacturing throughout Q2 2020 when the financial system was fully locked down and Q2 2021 when it had supposedly regained momentum was N0.86 billion or 5.4 per cent. The expansion recorded in commerce (which isn’t a high-capacity utilisation sector) alone added N0.51 billion (an equal of 60 per cent) to the growth within the dimension of the GDP.
The sectoral performances, as contained within the Q2 information and different current ones, underscore an financial system that isn’t solely bleeding but in addition deeply flawed by many contradictions. In continuation of the historic hollowing out, the manufacturing sector, although recorded optimistic progress within the final two quarters, remains to be tottering getting ready to collapse.
The sector moved from N1.4 trillion in Q2 2020 to N1.45 trillion in Q2 2021. Does the rise replicate the efforts put into rising the sector, together with interventions and financial incentives, within the current years? Maybe, it doesn’t seem to replicate the efforts the federal government put into reviving the sector, a lot much less the latitude that naturally adopted the re-opening.
Within the first two quarters of the yr, the manufacturing sector bought away with 3.4 and three.49 per cent respectively. Pretty much as good because the figures are, the sector’s efficiency remains to be within the destructive area and beneath pre-COVID period. Throughout Q2 2020, the sector misplaced 8.78 per cent with the next two quarters additionally recording destructive progress, resulting in annual progress of -2.75 per cent.
Agriculture, the fulcrum of the nation’s try at reviving the productive sector, is among the many few sectors that skilled optimistic progress in the course of the pandemic. In fact, nothing in need of that’s anticipated of a sector that has acquired a lot consideration when it comes to fiscal interventions and incentives at an enormous value to taxpayers. However the concern concerning the pace of progress of the sector persists. A lot is predicted of the sector not solely due to the pressing must flatten the meals inflation curve, which stood at 21 per cent on the final survey, but in addition its weighted influence on the financial system.
In keeping with the final quarter’s progress statistics, the sector alone accounted for 23.8 per cent of the complete GDP. And that was not a flash within the pan, it mirrored historic developments. If something has modified, the Q2 efficiency even fell in need of that of final yr and the current few years. Final yr, the ratio of the sector to the complete financial system was 26.2 per cent. That was about half of the complete service sector and 5 per cent greater than the contributions of industries.
In keeping with information by the World Financial institution, about 34.7 per cent of Nigeria’s workforce is engaged in agriculture, which accords it the very best diploma of inclusiveness.
This additionally means that the expansion of the sector issues extra for the nation’s want to scale back its worrisome unemployment price, which stood at 33.3 per cent on the shut of final yr.
There isn’t any real-time employment information in Nigeria, therefore it’s troublesome to know the way the labour market has responded to the expansion figures however most economists imagine final yr’s information may not have modified remarkably. And the GDP information are tough validation. Actual property and building have a big multiplier impact on job creation. Sadly, the figures of those crucial sectors will not be as vibrant as anticipated of a fast-recovering financial system.
The expansion of the development sector has been in a large swing. The true progress price of the development sector in Q2 2021 was 3.7 per cent YoY, an increase of 35.46 proportion factors from the speed recorded the earlier yr. Relative to the previous quarter, there was a rise of two.27 proportion factors. For the primary half of the yr, its progress was 2.4 per cent in comparison with -16 per cent in 2020. Concerning quarter-on-quarter (QoQ), the sector grew by -23.08 per cent in actual phrases, greater than the -24.77 per cent it recorded within the second quarter of 2020.
The incoherent progress doesn’t bode effectively for a sector that’s anticipated to help large job creation, particularly for the youths. And for a sector that’s infamous for casualisation, this sample of progress can hardly help employees retention and switch of technical know-how, a problem that would create a talent hole within the medium- to long run.
Actual property, a sector with big employment potential as effectively, seems extra progressive than building. But, its progress doesn’t match the massive housing deficit. Q2 2021 actual GDP progress of the sector stood at 3.85 per cent, greater than the expansion recorded within the second quarter of 2020 by 25.84 proportion factors, and a couple of.08 proportion factors greater relative to Q1 2021 Within the first half of 2021, actual property companies grew 2.79 per cent YoY in actual phrases, in comparison with -14.11 per cent recorded in 2020. By way of QoQ, the sector grew by -0.72 per cent in Q2 2021.
This sticky progress is difficult for the financial system given the massive gap within the labour market. If job progress continues to sluggish, it can take the nation a number of years to carry the financial system again to its degree of employment that may restore sanity within the society. In addition to, sooner employment progress means greater mixture demand and, subsequently, extra jobs.
Contemplating the present degree of restiveness, poverty and safety breakdown in several components of the nation, something lower than “V” job progress will escalate the already horrible state of affairs. Youth unemployment is within the area of 45 per cent, which is worrisome.
However economists are much more scared that the rising hostility will probably be worse if they aren’t taken off the streets instantly. That doesn’t recommend the sluggish job progress, which the outstanding Q2 GDP figures will, at finest, supply.
The current GDP information imply greater than mere statistics to the market and policymakers. Nevertheless, when weighed towards the bottom impact of the lull of Q2 2020 efficiency, which they’re in contrast with, the flashy information might idiot Nigerians and probably downplay the truth that the nation is just midway out of the deep gap it was in all through final yr.