Many Nigerians underestimated the resilience of the economy until last Friday when National Bureau of Statistics (NBS) rolled out its data for the fourth quarter of last year.
The most striking part of the information was 0.11 per cent surprise growth in the fourth quarter 2020 Gross Domestic Product (GDP), taking the economy out of recession.
This represents the first positive growth in the last three quarters.
That rebound in the economy also pointed to the importance of the non-oil sector, which received support from the government and the Central Bank of Nigeria (CBN).
The non-oil economy expanded by 1.7 per cent from a year earlier, the strongest rate in four quarters, with agriculture growing by 3.4 per cent and telecommunications increasing by 17.6 per cent.
This segment of the economy has been the biggest beneficiaries of the CBN’s intervention funds in manufacturing, healthcare, power, and housing, among others.
The CBN has also implemented various forms of liquidity measures to support the government’s short-term budgetary needs as well as other liquidity assistance frameworks that lifted small businesses.
CBN Governor, Governor, Godwin Emefiele said the apex bank implemented various forms of liquidity measures to support the government’s short-term budgetary needs as well as other liquidity assistance frameworks to ensure market liquidity.
He said there were, in addition, measures aimed at stabilising the foreign exchange market in the face of supply shocks precipitated by the pandemic. Also, spates of interventions to support and strengthen health institutions and medical support services to mitigate the impact of the pandemic were undertaken.
Emefiele said the measures had been very helpful in navigating the economy through this difficult time.
NBS statistics in perspective
Analysts said the positive growth reflected the gradual return of economic activities following the easing of restricted movements and limited local and international commercial activities in the preceding quarters.
The report added that as a result, while the fourth quarter 2020 growth rate was lower than growth rate recorded the previous year by –2.44 per cent points, it was higher by 3.74 per cent points compared to third quarter of last year.
Quarterly, real GDP growth was 9.68 per cent, indicating a second positive consecutive quarter-on-quarter real growth rate in 2020 after two negative quarters.
Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said contrary to market expectations, the economy recorded its first positive growth of 0.11 per cent (year-on-year) in the fourth quarter of last year after two consecutive quarters of negative growth.
“Full year growth for 2020 is -1.92 per cent and implies that the recession is over. This came in against the trend and means that the #EndSARS’ protests effect was exaggerated and had only a muted impact,” he said.
According to Rewane, of the 46 activities, 29 expanded as against 21 in third quarter. This has positive implications for the policy trajectory in 2021, as we expect the policy thrust to become more focused on ensuring price and exchange rate stability.
“Compared to 2016/17, this recession lasted only for six months. Also, the expanding sectors are job elastic and are likely to have a positive impact on the unemployment level in the economy,” he added.
”For 2020, the oil sector grew at –8.89 per cent compared to 4.59 per cent in 2019. The oil sector contributed 5.87 per cent total real GDP in fourth quarter 2020, down from the corresponding period of 2019 and the preceding quarter, where it contributed 7.32 per cent and 8.73 per cent.
“The non-oil sector grew by 1.69 per cent in real terms in the fourth quarter of 2020, slower than the 2.26 per cent recorded in the corresponding quarter of 2019, but better than the–2.51 per cent growth rate recorded in the preceding quarter. For the full year of 2020 however, the non-oil sector grew by –1.25 per cent compared to 2.06 per cent in 2019.”
Growth in the sector was driven by the Information and Communication (Telecommunications & Broadcasting).Other drivers were Agriculture (Crop Production), Real Estate, Manufacturing (Food, Beverage & Tobacco), Mining and Quarrying (Quarrying and other Minerals), and Construction,
Accounting for positive GDP
In real terms, the Non-Oil sector contributed 94.13 per cent to the nation’s GDP in the fourth quarter of 2020, higher than the share recorded in the fourth quarter of 2019 (92.68 per cent) and the third quarter of 2020 (91.27 per cent).
“For 2020, the Non-Oil sector contributed 91.84 per cent to real GDP, higher than 91.22 per cent recorded in 2019.
CBN’s economic interventions
Emefiele disclosed that under the N100 billion Healthcare Sector Intervention Fund, the CBN has approved and disbursed N10.15 billion for some projects for the establishment of advanced diagnostic and health centres and the expansion of some pharmaceutical plants for essential drugs and intravenous fluids.
As part of the N1trillion intervention targeted at Agriculture and Manufacturing firms, the CBN has disbursed N93.2 billion under the Real Sector Support Fund to boost local manufacturing and production across critical sectors.
This consists of over 44 greenfield and brownfield projects. The CBN has also approved N10.9 billion to 14,331 beneficiaries under the N50 billion Targeted Credit Facility for households and SME’s, out of which N4.1billion has been disbursed to 5,868 successful beneficiaries.
Emefiele said CBN’s efforts had led to gradual improvement in macroeconomic variables, particularly the improvement in the equities market, the containment measures of the COVID-19-induced health crisis, as well as, the impact of the increase in crude oil price on the external reserves.
Other interventions by govt
Some of the notable initiatives being implemented are the Nigeria Economic Sustainability Plan (NESP), and its injection of N2.3 trillion into the economy over 12 months.
There is also the Ministry of Trade and Industry, Micro, Small and Medium Enterprises Survival Fund, which incorporates a Guaranteed Off take Stimulus Scheme and the Credit Support to Micro Small Medium Enterprises.
The Special Public Works programme expected to engage 774, 000 Nigerians to cushion the effect of COVID-19 pandemic, among others, helped to support the economy.
The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said the CBN was the first state institution to respond with palliatives for businesses.
“Altogether, it announced an intervention estimated at about N3.5 trillion.This covered health, manufacturing, agriculture, infrastructure and Micro Small and Medium Enterprises.
“This is a gesture that deserves to be acknowledged. But there are issues around ease of access, which, I believe, the apex is looking into,” he said.
Head of Research, Afrinvest West Africa Limited, Abiodun Keripe, said the CBN, like most economic managers around the world, responded with monetary stimulus, interest rate reductions and other policies to reduce the burden of loan repayment on businesses and households.
He said the size of the monetary stimulus and urgency of disbursement is significantly what is different given how small it is relative to the GDP and how long it has taken to get the stimulus across to where it is needed.
According to CBN Deputy Governor, Edward Lametek, “From the monetary end, the robust interventions being implemented by the CBN and other policies, which were underway, like the Differentiated Cash Reserves Requirement (DCRR) and the minimum Loan-to-Deposit Ratio (LDR) before the COVID-19 pandemic, would continue to increase and redirect credit to the major growth and employment poles. All of those would benefit the economy more if the orientation of fiscal policy remains complementary.”
Lametek said in particular, policies and programmes directed at supporting production of import substitutes and increased utilisation of available local input and intermediates in production processes would give fillip to the real sector interventions by the apex bank.
Road to economic recovery
To ensure speedy economic recovery, the CBN has also developed a three-year policy plan. Emefiele, who announced the measures, said the Policy Response Timeline will guide Nigeria’s crisis management, and orderly rebooting of the economy by relying on homegrown solutions.
In a report entitled: Turning COVID-19 Tragedy into an Opportunity for a New Nigeria, the CBN boss said the policy framework will come in three phases – immediate term policy of zero to three months, short-term policy priorities of zero to 12 months and medium-term policy priorities of zero to three years.
Emefiele said the agricultural policies of the Federal Government are aimed at positioning Nigeria to become a self-sufficient food producer, creating millions of jobs, supplying key markets across the country and dampening the effects of exchange rate movements on local prices.
Achieving this, he said, would require building a base of high quality infrastructure, supporting small-holder and large scale agriculture production, creating an ecosystem of factories, storage and logistic firms that move raw materials to factories and use of fiscal priorities to create robust educational system.
According to Emefiele, there was no need to rely on the world for anything.
He said Nigeria should look inwards as a nation and guarantee food security, high quality and affordable healthcare, and cutting-edge education for the people.
“For a country of over 200 million people, and projected to be about 450 million in a few decades, we can no longer ignore repeated warnings about the dangers that lie ahead if we produce locally, because the security and well-being of our nation is continent on building a well-diversified and inclusive productive economy,” he said.