Nigeria’s fragile economic recovery to take a hit from fuel scarcity
by PATRICK ATUANYA
December 27, 2017 | 2:00 am| | | Start Conversation
The fragile recovery of the Nigerian economy will suffer from the current fuel scarcity plaguing the country. In a series of tweets on how the current fuel scarcity will impact on current economic growth, Yemi Kale, the Chief Statistician of the federation noted that “hours spent looking for fuel will be negative for GDP growth.” “It won’t help inflation either” he tweeted.
In another tweet, Kale said.
“Trade will be affected, telecoms, manufacturing, road, air transport and services in general. So not looking good,” Kale tweeted.
The Nigerian economy expanded by 1.4 percent in the third quarter of 2017 which was a turnaround on the negative 2.3 percent growth recorded in the comparative period of 2016.
The growth was mainly driven on the back of the rebound of the oil sector, which grew 26 percent in the third quarter of 2017 as against a negative 23 percent growth in the comparable period of 2016.
Non-oil sector growth for the same third quarter of 2017 was negative 0.8 percent, despite growth in the agricultural production. The fuel crisis will see non-oil sector growth suffer again in the fourth quarter worsening the negative growth in the sector.
Analysts note that the uneven growth of the Nigerian economy will therefore persist in the fourth quarter cementing the fragile nature of the country’s economic recovery.
Economist had earlier projected that the country’s economic growth will average 0.7 percent to 1.0 percent in 2017 before picking up to 2.0 percent in 2018.
The current fuel scarcity has dragged on for more than two weeks crippling economic activities in the festive season which usually witnesses high consumption expenditure on transportation, food and entertainment. Trade and services, two key sectors of the economy will therefore take the most hit from the current fuel crisis.
Analysts warn that the fragile growth in 2017 could also drag into 2018 if critical reforms are not implemented or if issues like the current fuel scarcity is allowed to persist in 2018.
Nigeria is targeting a GDP growth rate of 7 per cent by the year 2020 according to the Economic Growth and Recovery Plan (EGRP) but this is increasingly looking unrealistic.
Analysts note that only broad-based macro-economic growth polices like privatisation, foreign investments, serious commitment to developing the non-oil sectors can drive growth but warn that chances of these reforms happening is slim with the increasing focus on the 2019 elections and issues like the current fuel scarcity.
Nigeria’s peers Ethiopia, Kenya, Senegal and Tanzania have recorded GDP growth rates of 8 percent, 6.0 percent, 6.6 percent and 6.6 percent respectively in 2016 according to the international monetary fund (IMF) but the Federal Government’s ERGP document forecasts a 2.19 per cent growth rate in 2017 rising to 7 percent in 2020 driven by the non-oil sector.
Nigeria’s GDP reached 7.9 per cent with non-oil sector contributing 8.5 per cent in 2010 according to the National Bureau of Statistics (NBS) data with agriculture, building and construction, trade and services recording 5.7, 12.2, 11.2 and 11.9 per cent respectively in the period.
Analysts say this feat was achieved due to the favourable weather conditions, supply of farm inputs and government intervention programs in agriculture, building and construction activities in the country, huge investment in infrastructure by the government and growth of small and medium scale businesses.
Growth began to plateau in 2015, when GDP fell to 2.8 per cent and non-oil sector contribution declined to 3.8 per cent. Services, agriculture, trade and construction contributed more to GDP at 4.5, 3.7, 5.1 and 4.4 per cent respectively.
The economy fell into recession in the second quarter of 2016, and GDP fell to -1.6 per cent and non-oil was 0.22 per cent.
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