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Economy shrinks again, MAN, LCCI see recovery in third quarter

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Ifeanyi Onuba and Oyetunji Abioye

The National Bureau of Statistics on Tuesday released the Gross Domestic Product report for the first quarter of this year, which showed that the economy contracted by 0.52 per cent in the period.

With the negative growth rate of -0.52 per cent, the Nigerian economy is still in recession.

The rate of growth for the first quarter of 2017 is, however, an improvement over the revised -1.73 per cent GDP growth rate as of December 2016.

This is the fifth consecutive quarter of contraction that the economy would record since the first quarter of 2016.

The NBS report read in part, “In the first quarter of 2017, the nation’s GDP contracted by 0.52 per cent (year-on-year) in real terms, representing the fifth consecutive quarter of contraction since Q1 2016.

“This is higher than the rate recorded in the corresponding quarter of 2016 and higher by 1.21 percentage points from the rate recorded in the preceding quarter.”

However, the rate of growth, which is an improvement over the previous quarter, appears to be in line with the expectations of the Federal Government that the country will come out of recession by June this year.

The Minister of Information and Culture, Lai Mohammed, had on April 29 said that Nigeria was gradually moving out of recession.

He said going by a recent statement by the Central Bank Governor, Mr. Godwin Emefiele, the country would exit recession by the end of June.

The NBS in the report stated that during the first quarter, the aggregate GDP stood at N26.02tn in nominal terms, representing an increase of 17.06 per cent over the N22.23tn recorded in the first quarter of 2016.

During the period under review, it explained that the average oil production was 1.83 million barrels per day, which was 70,000 barrels higher than the figure for the fourth quarter of 2016.

It added that real growth of the oil sector slowed by 11.64 per cent year-on-year in the first quarter of 2017, representing a decline of 4.81 per cent relative to the rate recorded in the corresponding quarter of last year.

Quarter-on-quarter, the oil sector, according to the report, grew by 14.86 per cent in the first three months of this year.

As a share of the economy, the NBS report stated that the oil sector contributed 8.90 per cent of the total real GDP in the first quarter, down from the 10.02 per cent recorded in the corresponding period of 2016.

For the non-oil sector, the bureau said growth was largely driven by the activities in the agriculture sector, particularly crop production, Information and Communication Technology, manufacturing, transportation, and other services.

It said, “The non-oil sector grew by 0.72 per cent in real terms during the reference quarter. This was 1.05 per cent higher than the rate recorded in the fourth quarter of 2016, and 0.90 per cent higher than the corresponding quarter of 2016.

“In real terms, the non-oil sector contributed 91.10 per cent to the nation’s GDP, higher from the share recorded in the first quarter of 2016 (89.98 per cent), but lower than the share recorded in the fourth quarter of 2016 (93.25 per cent).”

The report put the real growth rate of the agricultural sector in the first quarter of 2017 at 3.39 per cent year-on-year, representing an increase of 0.30 percentage points from the corresponding period of 2016.

For the manufacturing sector, the report stated that the real GDP growth in the sector in the first quarter of this year was 1.36 per cent year-on-year, higher than the same quarter of 2016 by 8.36 percentage points.

This, it added, was the first positive growth rate recorded in the sector for over a year.

The Manufacturers Association of Nigeria and the Lagos Chamber of Commerce and Industry have expressed optimism that following the 0.52 per cent contraction of the GDP in the first quarter, the economy should come out of recession in the second or third quarter.

“The 0.52 GDP contraction recorded in the first quarter is an improvement over the 1.73 contraction the economy recorded in December 2016.  We are already on the verge of moving from the negative territory to positive territory. In December, it was -1.73 per cent; in March, it was -0.52; it is an improvement,” the Director-General, LCCI, Mr. Muda Yusuf, said.

“Some of the positive developments we witnessed in Q1 such as better foreign exchange policy, improvement in ease of doing business and creation of FX window will be reflected in the Q2 result that will be released later this year,” he added.

The President, MAN, Mr. Frank Jacobs, said he was not surprised by the negative GDP growth number because the country was not going to come out of recession overnight.

Jacobs said, “In as much as we are trying to get out of recession, it is not going to happen overnight. We expect that from Q3, we will begin to come out of recession. The current figure only shows that we are not yet out of the woods yet. We have to see how to manage production and seek to cope with some of the challenges facing manufacturers.”

Remarking on the outcome of Tuesday’s Monetary Policy Committee meeting, the MAN president said, “There is a need for a special window for manufacturers to access credit at five per cent interest rate. This will help them to play their role of creating jobs and also earn revenue in order to pay taxes.”

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