Analysts have highlighted the risks posed by persistent inflation, high interest rates, and unemployment, which have undermined the potential benefits of Nigeria’s recent GDP growth of 3.19% in the second quarter. The National Bureau of Statistics reported this growth on Monday, noting an increase from the 2.51% recorded in the second quarter of 2023 and surpassing the 2.98% of the first quarter this year. This economic expansion was largely driven by the services sector, which grew by 3.79% and contributed 58.76% to the total GDP.
Comercio Partners, in their latest update, acknowledged the positive economic shift but expressed concerns about the real impact on Nigerians. They noted that while the services and industry sectors have played crucial roles in driving recovery, the energy sector remains problematic. Despite a year-on-year increase in oil production from Q2 2023 to Q2 2024, a decline from Q1 2024 highlights ongoing challenges that could threaten future growth.
The firm also pointed out a slowdown in non-oil sector growth compared to Q2 2023, particularly within manufacturing and agriculture, which could expose vulnerabilities in the economy. They emphasized the importance of maintaining momentum in the services sector and continuing the recovery in the industry sector to ensure sustained GDP growth. Addressing the decline in agriculture and manufacturing is essential for achieving balanced and inclusive growth.
The analysts cautioned that Nigeria’s economic expansion might be “immiserising,” where GDP growth does not translate into better living standards. With an unemployment rate of 5%, inflation at 33.40%, and an interest rate environment of 26.75%, the potential benefits of GDP growth are significantly eroded. Applying Hanke’s Misery Index, Nigeria’s current score stands at 61.96%, reflecting the challenges faced by the populace despite the headline economic gains.
In contrast, researchers at Cowry Asset Management Limited offered a more optimistic view, suggesting that the normalisation and implementation of new government reforms and policies could drive national output growth, particularly supported by the industry and services sectors. They observed that Nigeria’s economy continues to grow positively, despite challenges such as high inflation, global dynamics, rising interest rates, and the depreciation of the naira. The non-oil sector, especially the financial institutions leveraging technology, has been instrumental in this growth.
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Cowry Research also noted the significant expansion of the oil sector, which grew by 5.70% in the previous quarter due to improved output. However, they warned of potential risks to Nigeria’s oil production, including crude oil theft, pipeline vandalism, and regulatory challenges. They expressed hope that a more accommodative stance from the Central Bank of Nigeria in September, coupled with an expected moderation in price levels, could further support economic growth.
