Analysis: Nigerian economy grows 5%, but human development continues to stagnate under Buhari

Nigeria’s gross domestic product (GDP) grew 5% in the second quarter (Q2) of 2021, according to the National Bureau of Statistics (NBS), but economists think there is not much to celebrate on this subject.

Indeed, unless the 5% GDP growth is sustained in the third and fourth quarters of 2021, the annual growth of the economy may be insufficient to have a significant impact on the population.

Currently, the average growth in the first and second quarters of 2021 is 2.75%, which barely matches Nigeria’s population growth rate.

However, sustained growth of 5% for the whole year will bring annual growth to 3.9%, which is a small sign that the poverty rate has started to decline.

Lagos Chamber of Commerce and Industry (LCCI) general manager Chinyere Almona said what matters now is maintaining the rate of growth.

She warned the country needs to monitor and respond appropriately to key threats to this growth, such as the third wave of COVID-19 infections that could result in restrictions on movement.

She also pointed to a growing wave of insurgency, banditry, kidnappings and persistent conflicts between farmers and herders as factors that could slow growth in the coming quarters.

Economic growth should be greater than population growth for any government to reduce extreme poverty, economists say.

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Under Buhari, Nigerian GDP growth did not exceed the population growth rate of 2.6%. The annual GDP growth in 2016, 2017 and 2018 was -1.58%, 0.83% and 1.89% respectively.

In 2019 and 2020, the annual GDP growth rates were 2.26% and -0.125% respectively.

This explains why extreme poverty is high in Buhari, analysts say.

About 51 percent of Nigerians, precisely 105 million citizens, are in the trap of extreme poverty, according to the World Poverty Clock.

The level of poverty is one of the measures of a country’s standard of living.

“We need to grow the economy by at least 7-8% per year for five to ten years based on an investment-oriented strategy. If we don’t do this very soon, the issues of multidimensional poverty, debt and insecurity could consume us over the next decade, ”Financial Derivatives Company CEO Bismarck Rewane said in a March presentation. 2021 titled ‘Building Nigeria’s Future Through Enterprise and Innovation.’

Likewise, despite GDP growth of five percent in the second quarter of 2021, Nigeria’s economy was smaller than in the second quarter of 2019, when growth of just 2.12 percent was recorded.

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In the second quarter of 2019, the size of the Nigerian economy (real GDP or GDP at constant 2010 prices) was 16.93 trillion naira, but growth was 2.12%.

In the same quarter of 2021, the economy declared a size of 16.69 trillion naira, but growth was 5%. This means that less economic activity took place in the second quarter of 2021 than in the same quarter of 2019, despite the differences in growth rates.

An economist and private sector consultant, Muda Yusuf, attributed the situation, in an interview to ICIR, to COVID-19, which has reduced operations and disrupted the supply chain.

But the size of an economy matters because the bigger it is, the better it is for poverty reduction, economic growth, per capita income growth and business income growth, economists say.

Neighborhoods GDP at constant 2010 prices Constant market price of GDP GDP rate (%)
Q1-2018 16 096 654 186 130.50 16 234 954 952 028.20 1.89
Q2-2018 16 580 508 070 066.30 16 718 625 281 982.90 1.5
Q3-2018 18 081 342 102 865.10 18,305,126,398,976.10 1.81
Q4-2018 19 041 437 589 274.10 19,277,641,988,698.50 2.38
Q1-2019 16,434,552,653,499.40 16,569,734,732,766.10 2.1
Q2-2019 16 931 434 893 647.40 17 076 100 723 853.10 2.12
Q3-2019 18,494 114,168,275.10 18 697 323 823 071.10 2.28
Q4-2019 19 527 724 958 744.50 19 750 934 716 051.80 2.55
Q1-2020 16,741,809,922,718.40 16,893,269,794,200.20 1.87
Q2-2020 15,897,931 938,753.20 16 044 513 730 642.50 -6.1
Q3-2020 17 824 482 082 149.40 18 109 596 017 728.80 -3.62
Q4-2020 19 550 147 904 321.50 19 753 163 949 441.20 0.11
Q1-2021 16,826,890,287,979.00 16 962 505 924 448.90 0.51
Q2-2021 16,694,666 154,392.20 16,904,236,416,060.30 5

Moreover, the GDP is not a true measure of the standard of living. The United Nations Development Program (UNDP) has adopted Human Development (HDI) as a true measure of the well-being of citizens.

It was originally developed by Pakistani economist Mahbub ul Haq in 1990, but has since been adopted by UNDP.

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The HDI measures access to knowledge (education), a long and healthy life (health) and a decent standard of living (income).

In 2020, Africa’s most populous nation fell three places to 161 out of 189 countries in the HDI, with a score of 0.539, which is a significantly low score.

Nigeria scored 152 in 2015 when Buhari took power.

Apart from millions of out-of-school children (estimated at 8.7 million), especially in the northern part of Nigeria, life expectancy in Nigeria is around 54 years.

Life expectancy in Ghana and South Africa is 64 years.

Nigerian doctors are on strike as the country posts some of the world’s worst disease statistics.

Nigeria’s misery index, which is calculated from unemployment and inflation rates, rose to 50.48% in March 2021 from 14.75% in 2015.

The higher the number, the more miserable the people of the nation are.

This implies that Nigerians are three times more miserable in 2021 than in 2015.

Yusuf said there were still concerns about the macroeconomic challenges in Nigeria, reflecting soaring inflation, weakening currency, illiquidity of the foreign exchange market and increasing profile of the debt, among others.

“The impact of GDP growth on the well-being of citizens and the productivity of the investment environment is crucial. It’s the metrics that matter most, at the end of the day. GDP figures are not an end in themselves, they are means to an end.

Naira has taken a nosedive since Buhari came to power. On Tuesday, August 31, the naira was N 410.32 to the dollar on the official market but N 526 on the parallel market, weakening N 6 in 24 hours.

In November 2014, naira traded for N155 to one dollar. But it was devalued at N197 in November 2015, six months after Buhari came to power.

Analysts attribute the situation to the reluctance of the CBN to float in the forex market and its insistence on controlling the supply of dollars.

Buhari was also cited as having ordered the governor of the CBN to stop allocating dollars to certain items.

Apex Bank is constitutionally empowered to be independent from politics, lawyers say, but that is not the case in Nigeria today.

Former CBN deputy governor Kingsley Moghalu said the umbrella bank must float the naira and stop subsidizing imports.

“The government cannot continue to set the price of the naira, which the central bank is doing. If you float the naira, you have to stop subsidizing imports. Our country is structured in such a way that it subsidizes imports into the country. This generates trade-offs.

“When you float the naira, you create an incentive for those who want to export and earn forex. In this way, you structurally move the economy towards those who want to export, but have to combine it with trade policy, ”Muoghalu said.

Another measure adopted by the CBN, which has proven to be counterproductive, is the ban on importers of raw materials from obtaining foreign exchange at the official rate.

The CBN banned 46 items ranging from milk to tomatoes from accessing foreign exchange dollars. Analysts believe Buhari’s umbrella bank is wrong in simply discouraging demand for dollars and other foreign currencies.

Cowry Assets Management Limited Founder and Managing Director Johnson Chukwu said ICIR that he did not subscribe to the use of “fiat” to discourage consumption.

“I encourage the use of commercial tools. The reality is, you cannot ban the consumption of products that people need. When you do this, you are forcing this merchandise into the black market, where people will now have to pay additional fees to keep them. You cannot legislate against human consumption, ”Chukwu said.

Unemployment (33.3%) has tripled since Buhari took power, and the interest rate has been high relative to other peers.

Inflation is 17.38% and foreign direct investment has plunged.

Total FDI to Nigeria in the first half of 2021 was $ 2.78 billion, down 61% from the $ 7.15 billion invested in the first six months of 2020, the SNB said. .

“We have work to do and if we want to achieve accelerated, sustainable and inclusive growth, we must attract national and international capital with its investment multiplier to reach a GDP level of $ 1.5 billion d ‘by 2030, when our population could be 250 minutes or more,’ Rewane said.

Odinaka ANUDU

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