Business

Recession: Not out of the woods yet

Despite conomy rebound in Q4, danger not yet over

 

The surprising rebound of the Nigerian economy in Q4 2020 according to Dr Alex Otti, a former managing director of the defunct Diamond Bank of Nigeria and gubernatorial candidate of the All Progressives Grand Alliance (APGA) in the 2019 general elections, indicates that Nigeria may recover faster from its current economic doldrum.

 

That, he said was based on the expected oil price and output increase this year. It could also point to the growing importance of the non-crude sector. Oil production fell to 1.56 million barrels a day in the Q4 from 1.67 million barrels in the previous three months.

 

While crude contributes less than 10 per cent to the country’s Gross Domestic Product (GDP), it accounts for nearly all foreign-exchange earnings and half of government’s revenue.

 

Speaking in the same vain, Bloomberg Africa economist, Boingotlo Gasealahwe, said: “The recovery is continuing, supported by easing of OPEC production cuts and higher oil prices.” He noted, however, that recurring waves of the Coronavirus infections,

Naira devaluation, high inflation and ongoing foreignexchange shortages will continue to pose risks to the economy. This came as the International Monetary Fund (IMF) warned that a slow roll-out of COVID-19 vaccines could threaten the economy’s recovery.

 

“The fact that we have seen a recovery in non-oil GDP growth is positive,” said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank. However, the headwinds associated with the second wave of Covid-19 may still be considerable.”

 

Analysis of the data of the recession announced earlier in Q3 2020 by the National Bureau of Statistics (NBS), revealed that the major drivers of Nigeria’s exit out of recession are: Crop production which grew at 3.68 per cent, Crude petroleum and Natural gas at 8.2 per cent, Trade at 14.9 per cent, Telecommunications & Information Services at 12.2 per cent, and Real estate at 5.7 per cent

 

Government’s policy stifles key growth sector, telecoms in Q12021

 

According NBS data, activities in the telecoms sector came second, just behind trade in driving Nigeria’s exit from the Covid-19 instigated recession but the SIM card restrictions imposed by the Nigerian Communications Commission (NCC) on the directive of the Minister of Communications and Digital Economy, Dr. Isa Pantami, may have retarded growth in the sector in the Q1 2021, said Nkem Okeke, a telecommunications expert.

 

He disclosed in a telephone interview that, “the number of telecom subscribers in the country dropped by 11.84 million in four months, according to latest industry statistics from the NCC.

 

“The recent report shows that telecommunications operators in the country recorded yet another loss of 4.13 million active subscribers in February 2021, as the industry recorded 195.73 million GSM users in the month.”

 

A further peep into the NCC report revealed that already, the four major telecoms service providers also recorded zero porting activities, following the NCC’s directive in December for the telcos to suspend sales, registration and activation of new SIM cards, hindering porting activities as well.

 

A further breakdown of subscriber statistics showed that Airtel once again lost the highest number of subscribers in February. MTN followed with a loss of 1.68 million subscribers.

 

It had 79.03 million subscribers in January, but the figure fell to 77.34 million in February. Globacom lost 415,071 subscribers, recording a total of 54.17 million subscribers as against 54.59 million users in January. Nigeria’s ‘population boom’ as a threat to economic growth  The NBS 2019 ‘Poverty and Inequality in Nigeria’, report, indicated that 40 per cent of the total population, or almost 83 million Nigerians, live below the country’s poverty line of N137,430 ($381.75) per year.

 

The NBS report is based on data from the latest round of the Nigerian Living Standards Survey, conducted in 2018-2019 with support from the World Bank’s Poverty Global Practice and technical assistance from the Living Standards Measurement Survey (LSMS) programme.

 

The Nigerian Living Standards Survey (NLSS) is the official survey that is the basis for measuring poverty and living standards in the country and is used to estimate a wide range of socio-economic indicators including benchmarking of the Sustainable Development Goals. Between September of 2018 and October of 2019, the National Bureau of Statistics conducted the latest round of the NLSS, a decade after the previous one. From the result of the survey, Nigeria overtook India as the country with the largest rate of people living in extreme poverty.

 

In Nigeria, about 86.9 million people live in severe poverty, which is about 50 per cent of nation’s entire population. While the country is smaller both geographically and in terms of population, it is failing at lowering the rates of poverty.

 

This, according to Prof Peter Olusapo Ogunjuyigbe, president of Nigeria Population Association (NPA) is partly due to the mismanagement of the oil business and the presence of corruption. “Along with this, the nation is going through a population boom, which will make managing poverty rates more difficult. One of the U.N.’s Sustainable Development Goals is to end extreme poverty by 2050. However, Nigeria’s poverty rates are currently going in the wrong direction.

 

Nigeria becoming unemployment capital of the world

 

Nigeria’s unemployment rate as of the end of 2020 rose to 33.3 per cent from 27.1 per cent recorded as of Q2 2020, indicating that about 23,187,389 (23.2 million) Nigerians remain unemployed.

 

This is according to the recently released labour force report published by the National Bureau of Statistics (NBS). Using the international measurement, Nigeria’s unemployment rate stood at 17.5 per cent while by the old metrics, it stands at 56.1 per cent.

 

A total of 30.57 million individuals were fully employed as at Q4 2020, that is work 40 hours and above, while 15.9 million of Nigeria’s population work between 20 and 39 hours.

The report showed that the estimated number of persons in the economically active or working-age population (15 – 64 years of age) during the reference period of the survey, Q4, 2020 was 122,049,400. A combination of both the unemployment and underemployment rate for the reference period gave a figure of 56.1 per cent.

 

This means that 33.3 per cent of the labour force in Nigeria or 23,187,389 persons either did nothing or worked for less than 20 hours a week, making them unemployed by Nigeria’s definition. The increase in the unemployment rate  figures can be attributed to the after-effect of the COVID-19 induced lockdown, which caused many organisations to reduce their work force as a means to cope amidst the pandemic.

 

Although businesses have resumed operations, they are yet to fully recover to prepandemic levels, indicating that some of these laid-off workers are still without work and 1.42 million others joined the group of unemployed in Q4 2020.

 

Inflation rise to 17.33% in February 2021, highest in four years

 

The Chairman

 

Betcy Group of Companies and President, Academy of Entrepreneurial Studies, Dr Ausbeth Ajagu, said despite the billions the Federal Government have sunk into agriculture in recent years, food inflation rose by 108 per cent since 2015.

 

“This is even as Nigeria’s inflation rate rose to 17.33 per cent in February 2021, from 16.47 per cent recorded in the previous month. This represents the highest inflation rate recorded in four years. ”

 

The last time Nigeria recorded an inflation rate this high was in February 2017, when it declined to 17.78 per cent from 18.72 per cent. “On a month-on-month basis, the Headline index increased by 1.54 per cent in February 2021, this is 0.05 per cent point higher than the rate recorded in January 2021 (1.49 per cent). “Food inflation rose to 21.79 per cent in February 2021 compared to 20.57 per cent recorded in January 2021.

 

“On a month-on-month basis, the food subindex increased by 1.89 per cent in February 2021, up by 0.06 per cent points from 1.83 percent recorded in January 2021.” He said what this rise in the food index indicated was that Nigeria is not producing enough to feed its population or simply put, the percertage at which food production is lower than the rate of population.

 

“What that tells you is that the economy is in danger despite exiting recession in Q4 2020 as food inflation will continue to rise until there is a deliberate policy by the government to bring about increase in productive above population growth rate.”

 

Last Line

 

There was a consensus by Dr Otto and Dr Ajagu that despite the vulnerable state of the economy after exit from the 2020 recession, a rapid increase in the no-oil economy and the rising price of oil will combine to put the economy back on the path of growth.

 

They therefore called for more efforts to improve the non-oil sectors of the economy

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