Growth in GDP commendable but not enough

Nigeria’s real gross domestic product (rGDP) grew by 3.98 percent (year-on-year) in the fourth quarter of 2021 to reach N20.33 trillion. The Nigerian Bureau of Statistics (NBS) reported in February that the growth was mainly driven by the non-oil sector, which grew by 4.73 percent and accounted for 94.81 percent of the total output. That year, the overall growth was 3.4 percent, markedly higher than the -1.93 percent recorded in 2020. The growth recorded in 2021 was the highest since 2015, suggesting that the economy was on a recovery path, according to NBS.

Its latest report read in part: “Nigeria’s Gross Domestic Product (GDP) grew by 3.98 per cent (year-on-year) in real terms in the fourth quarter of 2021, showing a sustained positive growth for the fifth quarter since the recession witnessed in 2020 when output contracted by -6.10 per cent and -3.62 per cent in Q2 and Q3 of 2020 under the COVID-19 pandemic.” Experts said the positive growth was an indication that government initiatives to support businesses affected by the Covid-19 pandemic bolstered the economy, given the rise in output.  However, they noted that the GDP figures “are not a sign of better economic conditions.” They observed that “many Nigerians’ didn’t witness any improvement in their wellbeing during the year under review.” 

Firstly, they pointed out “a very strong base effect in the numbers because when you’re comparing 2021 with 2020, you’re comparing a year when economic activity was less affected by Covid to a year when we had a very severe impact of the pandemic. Secondly, according to the experts, economic activity, generally, was rebounding in 2021. A year when we had recession, a year when the economy contracted and a year when a number of sectors were in lockdown. So when you’re comparing 2021with that kind of baseline, naturally, you should expect a very significant increase.” Thirdly, they said the growth in 2021 was partly a result of the rebound in oil price, averaging some 70%. Their conclusion was that while the 2021 growth “should be acknowledged and cautiously commended, its impact on other parameters such as poverty, unemployment and other macroeconomic indices should be explored.”

Yes, the government would do well to take note of that last point. As the experts argued, “we can’t just be celebrating numbers but the impact of the numbers on the wellbeing of Nigerians”. Bearing that in mind, the government should inject momentum into its programmes of poverty eradication, inflation reduction and infrastructure investment as well as security. For example, the current macroeconomic instability in the form of a double-digit inflation rate erodes purchasing power and discourages savings, thereby lowering investment and constraining the rate of growth. Hence, a mix of structural and monetary reform that results in a single-digit inflation rate would be instrumental in achieving an even higher  economic growth.