The Nigerian economy has recorded impressive recovery from the recession induced by the Coronavirus disease (COVID-19) pandemic in 2020. The economy has consistently recorded growth rates breaking many analysts’ predictions of expected lower growth rates. However, the economy has continued to struggle with many inhibiting burdens like inflation, weak revenue generation, degenerated infrastructure, forex challenges, unsustainable cost profile seen in debt services and subsidy payments, and the daunting threats of worsening insecurity. The Director-General of LCCI, Dr. Chinyere Almona, who gave this piece of information, stated that the chamber was concerned that if the nation continues in this trajectory, the economy may bleed away into a stagflation, which would impact on production cost, job losses, worsened forex crisis, and dampened growth in the medium term.
The DG disclosed that the National Bureau of Statistics (NBS) had announced that Nigeria’s Gross Domestic Product (GDP) grew in 2022Q2 by 3.54% year-on-year in real terms, being the seventh quarter of positive growth. The rate is lower than the 2021Q2 rate, which was at 5.01% decreasing by 1.47%. Quarter-on-Quarter, it was an increase of 0.44% points relative to 3.11% recorded in 2022Q1. “While we celebrate the latest growth figures, the chamber wishes to highlight some threats to future growth that need special attention: The oil sector has consistently recorded negative growth for the ninth consecutive quarter, contracting again by -11.8% y/y in Q2 2022 following a higher contraction of -26% y/y in Q1. The average daily crude oil production in Q2 was 1.43mbpd even lower than 1.49mbpd produced in Q1.
“If oil revenue makes up more than 80 percent of government revenue, we expect the government to tackle the menace of oil theft and pipeline vandalism with sterner approach. The non-oil sector grew by 4.8% y/y in Q2 ‘22 against 6.1% y/y in Q1 ‘22. Key drivers within the non-oil economy include transportation and storage (51.7% y/y), finance and insurance (18.5% y/y), telecommunications (7.7% y/y), trade (4.5% y/y), real estate (4.4% y/y), construction (4.0% y/y), manufacturing (3% y/y), and agriculture (1.2% y/y). Combined, these sectors account for 78.3% of total GDP in Q2. We urge the government to continue with the non-oil campaigns and interventions to sustain the targeted financing towards boosting non-oil export for enhanced foreign exchange earnings. The growth of 1.2% recorded for agriculture and the 3% for manufacturing are comparatively low when compared with other sectors that grew at above 5%.
“This is also indicative of the threats facing these sectors that power Nigeria’s real sector. The woes in these two sectors are responsible for the frightening rise in our inflation rate. And with the excruciating burden from debt service, subsidy payments, and worsening insecurity, many more production activities may be constrained in the coming months”, Dr. Almona warned. The chamber further advised the Federal Government to sustain its targeted interventions in selected critical sectors like agriculture, manufacturing, export infrastructure, tackling insecurity, and free more money from subsidy payments, saying it is worrisome that the 2023 budget estimations indicate that there may not be any significant allocation to capital projects for next year. LCCI urged the government to tackle oil theft to earn more foreign exchange, borrow from cheaper sources to reduce the burden of debt servicing, and take a decisive step towards removing fuel subsidies.
