GDP: Nigeria’s economic growth sluggish, weak ― LCCI

The Lagos Chamber of Commerce and Industry (LCCI) has stated that in 2019, Nigeria’s economy grew at a sluggish pace and was generally weak in strength. The Camber, however, stated that aside the Oil, ICT, Agriculture and Arts sectors which saw considerable growth, sectors like Manufacturing, Trade, Real Estates suffered constrain in terms of performance and contribution to the nations Gross Domestic Product (GDP).

According to the LCCI, in its statement titled ‘LCCI Comments On GDP Year 2019 Report’, which was signed on Sunday by its Director General, Dr Muda Yusuf, “We note the marginal improvement in Nigeria’s output performance as GDP Growth grew by 2.27% compared to 1.91% recorded in 2018. The growth in the year 2019 was largely driven by the following sectors:

“Oil sector: This sector grew at a faster pace of 4.59% in 2019, from 0.97% in 2018. This was driven by increased average daily crude production of 2.01 million barrels in 2019 compared with 1.92 million barrels in 2018, as well as favourable oil prices (which averaged at about $64 per barrel in 2019).

“ICT: This sector grew by 11.08% in 2019 compared to 9.65% in 2018. Growth in the ICT sector was driven by telecommunication and information services sub-sector, which rose by 11.33% and 11.41% in 2018 and 2019 respectively. The rapid growth of the ICT sector can be attributed to increased investment in fintech space, expanded e-commerce and diverse innovations in the use of ICT across sectors.

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“Agriculture: The sector grew by 2.36% in 2019 as against 2.12% in 2018. Growth of the sector was powered by crop production, which accounts for over 85% of productivity in the sector. On a quarterly basis, agriculture expanded by 2.28% and 2.31% in the third and final quarter of 2019, which was supported by the sustained intervention of the Central Bank of Nigeria and positive impact of the land border closure.

“Arts, Entertainment & Recreation: This sector grew by 4.12% in 2019 as against 2.53% in 2018. The improved growth was buoyed by creative industry players in the sector, favourable demographics and low infrastructure demand.”

On key sectors that could have added to the economic growth, the LCCI stated, “We note that the performance of key sectors that has the capacity to facilitate economic diversification was still largely constrained. We highlight the sectors as follows:

“Manufacturing: The sector grew at a slower pace of 0.77% in 2019 as against 2.09% in 2018. Growth of the sector was heavily weighed down by the oil refining subsector which slumped by 32% in 2019. Despite being the biggest beneficiary of CBN’s push for credit flows into the real economy, productivity in the manufacturing sector continues to be challenged by a tough operating environment, poor infrastructure and unpredictability of government policies.

“Agriculture sector recorded a modest growth of 2.36% in 2019 compared with 2.12% in 2018. Agriculture productivity is threatened by insecurity issues in the food-producing region, notably farmers-herders tension in the Middle Belt, poor road and railway network and adoption of outdated farming methods by small scale farmers. This has led to low agricultural yields.

“Trade sector remained in recession in 2019, as it contracted by 0.63% and 0.38% in 2018 and 2019 respectively. The suboptimal performance of trade could be attributed to border closure, high inflation, which affects purchasing power, foreign exchange exclusion policies, poor domestic connectivity and security issues.

“Real estate maintained its negative growth trajectory in 2019, contracting by 4.74% and 2.36% in 2018 and 2019 respectively. Real estate is a critical sector considering its employment-generating capacity. However, the absence of effective mortgage finance system, high cost of building materials, absence of long-term funds, infrastructure issues and weak macroeconomic fundamentals are major downside risks to the performance of the sector.”

On its conclusion on economic growth for 2019, LCCI stated that “The assessment of realities in the macroeconomic environment suggests that the economy is yet to recover from the 2016 recession.

“Growth is still sluggish and weak to create employment opportunities for the fast-growing population and lift millions of Nigerians out of poverty.

“There is need for the government to embrace the structural, policy and regulatory reforms to unlock the huge growth potentials in the economy. The areas to focus on are:

“Agriculture: Need for agricultural mechanization as over 70% of farmers in Nigeria operate on a small scale; Need to support the sector with seedlings; Development of rural infrastructure; Provision of modern farm equipment at subsidized rates; Ensuring linkage between agriculture and industry.

“Manufacturing: Need to fix power challenges to reduce cost and enhance competitiveness; Ensuring patronage of locally produced items; Curbing smuggling and dumping; Urgent need to reform port processes and ensure better port infrastructure.

“Trade: Need to improve domestic connectivity through better transportation infrastructure; Easing of cargo clearing process; Promotion of economic integration at the sub-regional and continental levels; Easing cross-border trade challenges; Need for Nigerian Customs to prioritize trade facilitation over revenue generation.

“Real Estate: Need to create an effective mortgage finance system with single-digit interest rate; Creation of a long-term pool of funds to finance the sector; Easing the challenges of land documentation and perfection of land titles; and Review of import tariffs on some critical building materials in which there is limited local production capacity.”