The National bureau of statistics (NBS) in its latest Gross Domestic Product (GDP) report for Quarter 4 2020(Q4 2020) shows that the Nigerian economy grew by 0.11 % in real terms from a negative of -3.2 % in Q3 2020. This represents the first positive quarterly growth since the 1st Quarter of 2020. For the full year 2020, the annual growth of real GDP was estimated at -1.92%.
In nominal terms, Q4 2020 GDP stood at N43,564,006.29. This performance is higher when compared to the fourth quarter of 2019 which recorded a GDP aggregate of N39,577,340.04, representing a year on year nominal growth rate of 10.07%.
According to the NBS, “the positive growth reflects the gradual return of economic activities following the easing of restricted movements and limited local and international commercial activities in the preceding quarters”.
For the purpose of clarity, the Nigerian economy is divided into 2 major sectors; the oil-sector and the non-oil sector.
OIL SECTOR CONTRIBUTION
In the fourth quarter of 2020, an average daily oil production of 1.56 million barrels per day (mbpd) was recorded. This was lower than the daily average production of 2.00mbpd recorded in the same quarter of 2019 by -0.44mbpd and the third quarter of 2020 by -0.11mbpd.
For the full year 2020, the oil sector grew at -8.89% compared to 4.59% in 2019. The oil sector contributed 5.87% to total real GDP in Q4 2020.
NON-OIL SECTOR CONTRIBUTION
In the quarter under consideration (Q4 2020), the non-oil sector grew by 1.69% in real terms. The growth recorded is slower than the 2.26% recorded in the corresponding quarter of 2019, but an improvement when compared to the rate of -2.51% recorded in the preceding quarter.
For the full year of 2020, the non-oil sector grew -1.25% compared to 2.06% in 2019. The report has it that the growth in the non-oil sector was mainly driven the Information and Communication (Telecommunications & Broadcasting) sub-sector.
In the 4th Quarter 2020, Non-Oil sector contributed 94.13% to the nation’s GDP, higher than the share recorded in the fourth quarter of 2019 (92.68%) and the third quarter of 2020 (91.27%).
The Q4 2020 result is a reflection of economic realities (Though recovering but still weak) which is largely attributed to the reopening of economic activities in almost all sectors of the economy. We agree that the full year 2020 GDP of -1.92 percent was largely attributed to the global pandemic COVID-19, but we must know the Nigerian economy was already undergoing issues such as rising inflation, increasing unemployment, rising debt service cost, among other structural issues before the pandemic. For there to be sustained recovery, the government will have to pay attention to the above issues.
We still maintain that the sectoral contribution to GDP in the 4th Quarter of 2020, with the oil sector contributing 5.87% while the non-oil sector contributing 94.13% shows that the Nigerian economy is well diversified but not on the revenue front. A well-diversified economy creates an opportunity for income diversification if more attention is given to sub-sectors like agriculture, information and communication, and mining.
The drop in the daily oil production can be attributed to the OPEC deal cut which took effect towards the 4th quarter of 2020. We believe that the cut will be compensated by a steady rise in the global oil price.
A focus on infrastructure like power and access road will help drive viable sectors like agriculture that contributes over 26 percent to overall GDP in Nigeria. Value creation from agricultural produce will create foreign exchange earnings while creating jobs for the youthful population.
With the opportunities offered in the AfCFTA, the roll-out of vaccines globally, and the regulatory changes made by the Nigerian government as seen in the Finance ACT 2020, CAMA, among others, we believe the positive growth as seen in the Q4 GDP report can be sustained in 2021.