Here is full text on Gross Domestic Products (GDP) performance report of year 2021 by leadership of CPPE

 

Posted by allcitynews.ng

 

 

 

According to the National Bureau of Statistics [NBS], Nigeria’s GDP grew by 3.40% in 2021, year on year. This marks the highest GDP growth rate since 2015.

This growth performance is higher than projections by the IMF (2.6%) and the World Bank (2.7%).

The quarterly GDP figures indicates that the economy grew by 3.98% in the fourth quarter of 2021. This was also the fifth consecutive quarterly GDP growth recorded in the economy.

The sectoral disaggregation of the annual GDP data indicates that the following sectors and subsectors recorded positive growth:

the rail transport (36.95%), air transport (19.70%),

road transport (17.13%),

financial institution (10.53%),

insurance (6.24%),

Trade (8.62%), cement production (6.64%),

chemical and pharmaceuticals (8.13%),

food and beverage (5.73%),

motor vehicles and assembly (4.23%),

construction (3.09%),

ICT (7.28%), real estate (2.26%).

These growth performances were a reflection of the progressive recovery from the shocks of the pandemic and the rebound of economic activities in these sectors.

However, some sectors contracted.  These include oil refining which contracted (47.94%),

crude oil production (8.3%),

textiles and apparels (1.27%),

wood and wood products (1.54%),

pulp and paper industry (0.32%),

accommodation

And food services (0.45%).

It is instructive that the biggest contraction was in the oil and gas sector.  These figures are indicative of the weak sectoral performance on account of the collapse of domestic petroleum refineries, crude oil theft, inappropriate policy environment, stifling regulatory environment and dwindling investors confidence.

THE KEY GROWTH DRIVERS:

The following were the key drivers of the growth performance recorded in the 2021 GDP:

1. There is a strong base effect resulting from the fact that 2020 [the reference year] was a year of recession. In other words, being a year and year comparative analysis, comparing 2021 with 2020 naturally resulted in a strong improvement in comparative performance. 2020 was the peak of the covid pandemic and the associated disruptions in the economy. The year ended with an output contraction of 1.8%.

2. The rebound of economic and business activities across all sectors of the economy as the pandemic effects progressively dissipates.     There was a relaxation of restrictions, lockdowns and reduction in the supply chain disruptions. These naturally impacted on domestic economic activities and global economic recovery.

3. There was an aggressive rollout of vaccines in 2021 especially in the advanced economies which significantly boosted the sentiments of investors globally. This of course boosted investment and consequential growth both domestically and globally.

4. Rebound in crude oil price: being an oil producing country the rebound of crude oil price in 2021 impacted positively on growth performance. Average crude oil price was $70/barrel in 2021 as against $42/barrel in 2020. Historically, there is a strong and positive correlation between oil price and economic growth in the Nigerian economy. The rebound of oil price was a key driver of 2021 growth.

5. Economic Stimulus: the economic stimulus programme of the government, encapsulated in the Economic Sustainability Plan also played a role in accelerating the recovery of the economy in 2021. The government introduced quite a number of interventions which impacted positively on those who benefitted from those interventions. Projected spending under the stimulus plan was N2.3 trillion.

GDP GROWTH, POVERTY REDUCTION, ECONOMIC INCLUSION AND JOB CREATION NEXUS

Laudable growth performance is one thing, translating the growth to improved welfare, job creation, poverty reduction and economic inclusion is a completely different matter.

The last few years was characterized by worsening poverty situation, high inflationary pressures, massive erosion of purchasing power, high energy prices, escalating production cost, sharp currency depreciation and many more. These are critical developmental metrics on the basis of which the performance of the economy should also be measured. Therefore, going forward, policy makers should prioritize these key development indicators. Citizens welfare and investment productivity in the economy matter even more than the GDP numbers.

SECTORAL ANALYSIS OF THE GDP

SECTORS THAT RECORDED POSITIVE GROWTH

Agricultural Sector [2.13%]

· Agricultural sector expanded by 2.13%.  Though positive, growth in the sector remained subdued by the intractable insecurity in many parts of the country, especially in farming communities.  This phenomenon continues to inhibit agricultural productivity.

· Technology application in agriculture remains weak and impacting productivity.  Traditional farming methods are still largely dominant. Transportation and logistics continues to aggravate output cost in the sector. The various intervention funds have had a measured impact on productivity because of security and structural factors.

Food and Beverage Manufacturing Sub-sector [5.73%]

· This segment of the manufacturing sector is one of the most resilient.

· The sector is driven by a strong backward integration business model.  A significant part of the raw materials is sourced domestically.

· The sector leverages the large domestic market and population.

Cement sub-sector [6.64%].

· Sector characterised by strong backward integration strategy with its main raw materials being sourced locally which is limestone. The sector also leverages a large domestic market and favourable tariff protection.

· Industry structure is oligopolistic

· Impacted by recovery of the real estate and construction sectors.

Chemicals and Pharmaceuticals sub-sector [8.13%]

· Sector benefited from a robust stimulus at the onset of the pandemic.

· Sector leveraged the country’s large population and domestic market.

· There is favourable tariff protection for most of the products in the sector.

· However, sector growth was subdued by the challenges of forex liquidity issues and currency depreciation.

Vehicle Assembly Plants 2.3%

· This sector grew on the back of fiscal policy measures of government. There are generous tariff concessions of SKD and CKD.

· There is a strong lobby to promote the patronage of locally assembled vehicles.

· Sector also grapples with challenges of access to forex and the exchange rate depreciation because of its high import dependence.

Trade Sector [8%]

· It is one of the biggest sectors in the economy contributing 16% to the GDP.

· large employer of labour next only to agriculture.

· The sectors growth was driven by the easing of the pandemic induced. The restoration of global supply chain which was earlier disrupted by the pandemic.

· The resilience of the informal sector also played a role in the growth as the sector is largely driven by the informal sector.

· The sector is also supported by the large market and growing population.

Rail Transport and Pipelines [36.95%]

· This sector recorded one of the highest growths which was 36.95%.

· High patronage of the functioning component of the rail system, especially between Abuja-Kaduna and Lagos-Ibadan. Owing to concerns about insecurity and kidnapping on the road.

· Impact is limited because only a small part of the country is currently covered

· However, the pipeline component of this sub-sector has not made any significant contribution because of the issues of the vandalization of pipelines.

· Rail sector contribution to GDP not captured in the GDP data, perhaps a reflection of its weak contribution to GDP

Air Transport [19.7%]

· This is one of the sectors that experienced the worst shocks inflicted by the pandemic, but now recording one of the fastest recovery.

· The sector benefitted from the easing of lockdown and the easing of travel restrictions domestically and globally.

· Passenger traffic increased because of safety concerns in road transportation.

· Although, the sector remains pressured by high cost of aviation fuel and stifling regulatory compliance costs.

· Sector contributes 0.09% to GDP

Road Transport [17.13%]

· Road transportation is the dominant mode of transportation.

· Easing of the pandemic travel restrictions aided its recovery.

· Improvement in road infrastructure enhanced domestic connectivity.

Maritime Sector

Maritime sector not properly captured in the GDP data.

ICT Sector [7.28%]

· The sector is one of the fastest growing as digital technology gains increasing traction.

· The sector’s growth was consistent, even during the pandemic.

· Growth driven partly by the young demographics, youth population of about 60% in Nigeria.

· Many sectors leveraging ICT for growth.

Financial Institutions [10.53%]

· Recovery of economic activities naturally reflect in the performance of financial institutions as financial institutions are central to many transactions in the economy.

· Restoration of economic activities increases banking transactions and also the demand for credit.

· Increasing fiscal deficit and associated government borrowing increases investment opportunities in government securities especially treasury bills and government bonds by financial institutions and their customers.

· Increasing digitization of the sector.

Insurance Sector [6.24%]

· Economic growth recovery naturally reflects in increased insurance transactions.

· Although the impact on the growth of insurance is still subdued because of the weak insurance penetration.

· Sector growth also softened by weak compliance with insurance regulations and laws, especially with regards to insurance of public assets by MDAs.

SECTORS THAT CONTRACTED

Crude Oil [8.30%]

· Intractable oil theft and vandalization of pipelines.

· Divestment by oil majors from the upstream oil sector,

· lack of political will on the implementation of the Petroleum Industry Act, which weakened investors’ confidence,

· Rapidly evolving global energy transition, making it difficult for fossil fuel investments to attract funding.

· Stifling regulatory environment.

Oil Refining [47.94%]

· This is the sector with the biggest contraction in 2021

· Sector characterized by unfriendly policy environment,

· Perpetuation of petroleum subsidy and the associated distortions and transparency challenges

· It is difficult to attract private investment because of subsidy induced distortions.

· The dominance of the sector by the public sector namely the NNPC.

Textile and Apparel [1.27%]

· The dominance of textile market by second-hand clothes largely as a result of poverty.

· Smuggling of textile materials, fabrics and second-hand clothing

· High cost of domestic production of textiles, especially the high energy cost.

· High prices of locally produced textiles.

· Obsolete technology of many textile manufacturing firms, affecting productivity, cost and competitiveness.

Wood and Wood Product [1.54%]

This sector contracted by 1.54% as a result of the following:

· Illegal exports of woods

· High cost of furniture production

· Weak aggregate demand

· Intense competition in the sector because of the ease of entry and exit

Pulp and Paper Industry [0.32%]

· Collapse of the paper mills [Nigeria Newsprint Manufacturing Company, Oku Iboku; National paper Manufacturing Company, Iwopin; Nigeria Paper Mill, Jebba

· Total dependence on imported raw materials

· Foreign exchange issues around liquidity and depreciation in the currency

· Disruption caused by the digital revolution which negatively impact the paper and printing industry.

· Many transactions are done online which require, this reduces the demand for paper.

Accommodation and Food Services [0.3%]

· The hospitality industry is yet to fully recover from the shocks of the pandemic.

· High operating cost in the hospitality industry, especially energy cost.

· Intense competition in the sector, eroding profit margins,

· Weak consumer demand.

 

DR Muda Yusuf, Chief Executive Officer  (CEO) Centre for the Promotion of Private Enterprise (CPPE), Economic & Business Advocacy Think Tank