Latest GDP Surge Leaves Manufacturers Cold

The marginal improvement in the latest GDP performance notwithstanding, manufacturers and economy watchers argue that underlying challenges such as rising costs of production, erratic power supply, and lingering foreign exchange issues are still preventing manufacturers from sharing in the optimism surrounding the GDP growth, writes Festus Akanbi 

In a period of persistent economic turbulence, an indication of a marginal improvement in the nation’s Gross Domestic Product (GDP) as released by the National Bureau of Statistics (NBS) was expected to offer a refreshing dispensation of hope and confidence in the Nigerian economy. 

In its second quarter 2024 report, the NBS said that Nigeria’s Gross Domestic Product (GDP) grew by 3.19 per cent (year-on-year) in real terms in Q2 2024, from 2.98 per cent in Q1, 2024 and 2.51 per cent in the same period last year. 

The NBS’ breakdown showed that the GDP growth in the second quarter of 2024 was driven mainly by the services sector, which recorded a growth of 3.79% and contributed 58.76% to the aggregate GDP. The agriculture sector grew by 1.41%, from the growth of 1.50% recorded in the second quarter of 2023. The growth of the industry sector was 3.53%, an improvement from -1.94% recorded in the second quarter of 2023.

 In terms of share of the GDP, the industry and services sectors contributed more to the aggregate GDP in the second quarter of 2024 compared to the corresponding quarter of 2023. In the quarter under review, aggregate GDP at basic price stood at N60,930,000.58 million in nominal terms. This performance is higher when compared to the second quarter of 2023 which recorded aggregate GDP of N52,103,927.13 million, indicating a year-on-year nominal growth of 16.94%. 

Cautious Optimism

Curiously, real sector operators and some economic analysts do not share the optimism engendered by the latest GDP result, a development that economic watchers said further affirmed the dichotomy between data and people’s perception of economic performance. 

Speaking on the GDP performance, an investment banker and economist, who is also the CEO of The CFG Advisory, Adetilewa Adebajo maintained that the trajectory of growth and inflation, though not yet optimal, is however in the desired direction and allays the fears of recession and affirms the orthodox monetary policy stance of the CBN. 

Adebajo, who faulted the 2023 economic reforms of the current administration stated, “It is now evident that the cart was put before the horse, as reforms were implemented too quickly, devoid of adequate planning and resources, leading to the unintended consequences. The credibility of the reform program is now in question and a state of quagmire. FGN needs to urgently reset, communicate the benefits of the reform to the stakeholders, and deliver tangible results by year-end.”

Speaking in the same vein, a finance analyst, who spoke on condition of anonymity pointed out that it is regrettable that the finance sector is still the greatest beneficiary of the Nigerian situation, saying it is laughable to expect overall growth in this scenario. “What I have not seen highlighted in the report is that the largest contributor to that GDP, also the fastest growing sector, is Finance. We all saw the rent banks obtained from the naira devaluation. Do we need to devalue again to increase GDP?  Is it the banks’ profit that will trickle down to the man on the street? For certainty, the so-called GDP number is just the wealth of a tiny percentage of the population. We saw in the report that agriculture and manufacturing productivity declined. So, there’s nothing really to cheer about in that GDP release,” he concluded.

Manufacturers: We Cannot Relate with the GDP Growth

 His sentiment was shared by the nation’s manufacturers’ body, the Manufacturers Association of Nigeria (MAN) and the Lagos Chambers of Commerce and Industry (LCCI) which both insisted that the growth is not reflected in the experiences of manufacturers and the broader Nigerian populace. 

Their position appears to represent the perception of the average Nigerian who is still battling the rising cost of living and the depreciation in the values and standards of infrastructure. According to manufacturers, the reported growth fails to capture the true challenges confronting the manufacturing sector including soaring production costs, insufficient infrastructure, and persistent supply chain disruptions.

As Nigerian manufacturers continue to battle the twin problem of high operating costs and the fallen purchasing power of consumers of their products and services, analysts said it will be difficult to convince this category of Nigerians that the economic performance has improved.  This was the position of a former chairman of the Manufacturers Association of Nigeria (MAN), Apapa branch, Frank Onyebu, who was quoted as saying that based on the reality on the ground, there was no indication that the GDP increased or grew by 3.19 per cent, neither did he believe in the attainment of the five per cent GDP prediction by the IMF considering the way the country was being managed at the moment.

“Things are not going well. I’m in the manufacturing sector, a lot of companies are shutting down, and the inflation rate is so high. If the agriculture sector is growing at least the food inflation will not be high. The cost of food and other items is still very high. These figures are not convincing,” he explained.

On his part, the chairman SMEs Group, of the LCCI, Daniel Dickson-Okezie could not draw a link between the current distortions in the economy including the devaluation of the currency and the biting inflationary pressures and the positive GDP performance.

Insisting that the growth reported by the NBS hasn’t translated into tangible benefits for the general population and those operating within the commercial sector, the LCCI official said, the situation of things gives cause to doubt if the GDP growth is real or not and that no Nigerian can say that he is feeling the impact of any growth in terms of the GDP growth.

Between Data and Perceptions

The Chief Executive Officer of the Centre for the Promotion of Private Entreprises, Dr. Muda Yusuf, who provided a clearer analysis of the latest NBS figure on Nigeria’s GDP performance said, “The new GDP report is an improvement, even though it is marginal, it is good for the economy since we are not talking about contraction, especially when compared with the previous economic performance.”

Yusuf admitted that the performance, generally has not been even, saying that is not unusual. 

He, however, pointed out that “When we talk about the economy and growth, it is important to see how inclusive the growth is and when you are talking about the perceptions of the citizens and the perceptions of investors about the economy, sometimes, some of the perceptions are at variance with the growth data and from what we have seen so far, the key sectors that have powered this growth first were crude oil and gas, which grew by 10.15 per cent. 

“We have metal ore which grew by 58 per cent, which is quite big; there is rail transport which grew by 57.14 per cent; you have water transport which grew by 38 per cent and we have the financial institutions which grew by 30 per cent.” 

He raised the possibility of the fact that Nigerians are yet to see the effect of the marginal improvement in the economic indices because the sectors that recorded improvement are not those generating large employment opportunities.

He said, “We can see that these are big numbers but the challenge now is that these sectors that have grown phenomenally are not the key sectors that have so many people on board. And of course, we have some marginal growth in some other sectors, for instance, agriculture grew by 1.41 per cent. Manufacturing also grew by less than two per cent, while trade grew by 0.7 per cent. When you look at agriculture, trade, construction, and manufacturing, these are sectors that have high job elasticity, so that when they grow, they create a lot of jobs.”

It is hoped that the nation’s economic handlers will realise the growing disparity between the performance indicators and the reality in the country in a way that will reflect in future economic planning. 

Until the issues of unemployment, instability in the foreign exchange market, unreliable and high cost of energy, and poor infrastructure are urgently fixed, the celebration of improved GDP figures won’t make meaning to ordinary Nigerians.