Although hit hard by Boko Haram insurgency and killings, the country manages to remain on the growth track as the threats prove least deterring for investors, reports Team IFM
Abuja, June 17: Nigeria’s economy grew at an estimated 6.6 percent in the first quarter of the year, its central Bank said citing figures from the National Bureau of Statistics.
Growth in sub-Saharan Africa’s second largest economy after South Africa compared with 6.9 percent in the previous quarter, the central bank said in a report on its website. It attributed the slower growth mostly to poor show of the non-oil sector.
During the quarter under review, revenue fell 2.4 percent to 2.4 trillion naira compared with the previous quarter. The government ran up a deficit of 284.8 billion naira (US$1.8 billion) which translates into 2.9 percent of estimated gross domestic product (GDP).
Oil receipts increased 16 percent at 1.8 trillion naira over the budget estimate and were 1.4 percent higher than the previous quarter. Oil accounts for more than 90 percent of the country’s foreign currency income.
Non-oil receipts decreased 13 percent to 575.8 billion naira and were 23 percent below the budget estimate.
With 6.6 percent growth of the economy in April and a rebasing calculation almost doubling its GDP to more than $500 billion, Nigeria has emerged as Africa’s largest economy leaving behind South Africa, according to National Bureau of Statistics that releases official data.
Most governments overhaul GDP calculations every few years to reflect changes in output, but Nigeria had not done so since 1990. Therefore, sectors such as e-commerce, mobile phones and its prolific “Nollywood” film industry — now worth 1.4 percent of GDP — had to be factored in to get a better picture of the economy, Reuters quoted statistics chief Yemi Kale as telling reporters in the capital of Abuja.
VANITY EXERCISE
For 2013, GDP of Nigeria, Africa’s top oil producer, was 80.22 trillion naira ($509.9 billion) – up from the 42.3 trillion naira estimated before the rebasing exercise. The new figure shrank the debt-to-GDP ratio to 11 per cent for 2013, against 19 percent a year ago, Kale said.
Growing attention from foreign investors made it imperative for the government to overhaul its statistics calculations for greater accuracy. Kale told Reuters that the base year would be recalibrated every five years, as done by all other countries.
Analysts said the recalculated GDP would definitively raise Nigeria’s profile but with little change on the ground. Many Nigerians shrugged off the good news.
“I’m not really impressed. I don’t feel it in my pocket,” Reuter quoted a middle-aged farmer as saying. He added that those controlling the economy, those with government contracts would get all the money leaving the masses as wretched as ever.
The popular view is that Nigeria’s economy is tweaked in favour of a handful of influential oligarchs.
“This is an exercise in vanity,” Bismarck Rewane, CEO of Lagos-based consultancy Financial Derivatives, told Reuters, though he said the new figures were more accurate.
Africa’s most populous country with 170 million people, Nigeria has been gaining importance as an investment destination owing to the size of its consumer population and growing capital markets.
The recalculated GDP figures make the country the 26th biggest economy in the world, up from 33rd before the rebasing. It comes at a time when foreign investors are taking greater interest in Africa’s growth potential and expanding middle class.
Finance Minister Ngozi Okonjo-Iweala told Reuters recently that billions of dollars of foreign and domestic investment were envisaged for the current year, including $1.5 billion in agriculture.
Though GDP per capita rose to $2,688 last year from an estimated $1,437 in 2012, poverty and inequality widened.
“We need to work hard on infrastructure, governance, corruption and building a social safety net,” Okonjo-Iweala told Reuters. “Inequality has been rising.”
Services replaced farming as the biggest sector, worth 41.9 trillion naira, compared with 17.6 trillion naira for farming. Most services growth came from telecoms and real estate.
Nigeria’s annual GDP growth for 2013 is expected to come in at 7.41 percent after the rebasing, compared with about 6.5 percent in 2012, statistics chief Kale said.
Armed with recalculated higher GDP, Nigeria may argue that it should join the G20 and the BRICS grouping of the most powerful emerging economies that also include Brazil, Russia, India and China. South Africa currently represents Africa at both forums.
INSURGENCY THREATS
Back home, better GDP and its growth may not come to the aid of the country as it approaches what will be hotly fought elections next February. Sundry political risks including security headaches, especially the insurgency being waged by Islamist sect Boko Haram, remain a great concern.
Also, there is no denying the fact that Nigeria’s worst violence in two years poses a threat to the momentum the country has built from years of economic growth, according to some business executives interviewed by Bloomberg.
So far, Boko Haram’s five-year-old insurgency, largely confined to the north-east until recently, has left more than 4,000 people killed, according to the Brussels-based International Crisis Group. The group’s recent bomb attacks near the capital of Abuja killed 90 people.
It is holding more than 200 girls it kidnapped from a boarding school, threatening to sell them as slaves and prompting offers of assistance from the US, the UK and other countries to help rescue them.
Yet many investors remain optimistic about Nigeria’s prospects, even as ethnic and sectarian blood-letting dominates global attention.
“It (insurgency) does slow down the plans that we have, it does put out the projections that we have by a year or two,” Bloomberg quoted Thabo Dloti, chief executive officer of South Africa’s fourth-largest insurer Liberty Holdings Ltd. (LBH), as saying.
His is one of the companies committed to investing in Africa’s biggest economy, where, for now, the promise of selling goods and services to a population of about 170 million outweighs the danger of bomb attacks and killings.
Foreign direct investment in the West African oil-exporting nation rose 28 percent to $21.3 billion last year, and was $2.5 billion in the first two months of 2014, according to the national statistics agency.
Frans van Houten, chief executive officer of Dutch electronics firm Royal Philips NV, told Bloomberg that his company would not be deterred by the violence. “Philips has a strong commitment to develop the business here.”
“People are naturally concerned from a human point of view with the tragedy going on, but not from an investment point of view,” The agency quoted Julian Roberts, chief executive officer of Old Mutual Plc (OML), as saying.