The 2019 economic growth projection of the Nigerian government is fast becoming a mirage as lack of policy direction takes its toll on the economy, causing it to grow sluggishly. Nigerian economy grew at a slower pace by 1.94 per cent year-on-year in the first six months of 2019, lower than 2.1 per cent growth it achieved in March.
The government in the Economy Recovery Growth Plan (ERGP), which is the economy policy document of the President Muhammedu Buhari-led administration, had projected the economy to grow 4.5 per cent this year, while the Central Bank of Nigeria (CBN) expected it to grow 3 per cent during this period. However, the World Bank which initially predicted that Nigeria’s economy would grow 2.2 per cent in 2019, later lowered it to 2.1 per cent. The latest data released last week by the National Bureau of Statistics (NBS) showed the weaker growth in the country’s non-oil sector, which grew just 1.64 per cent, was hugely responsible for the poor performance of the economy in the second quarter of this year, although oil sector expanded 5.15 per cent. Nigeria had slipped into an 18-month recession due to significant drop in crude oil price to $27 in 2016, and the economy has been growing sluggishly since its recovery in June 2017.
The delay in the passage of the 2019 budget, which President Buhari eventually signed into law on May 27 and the almost three months the President had to wait before naming his cabinet, impacted the Nigerian economy negatively, Dr. Vincent Nwani, an economist and business and investment consultant told BusinessHallmark. “Both the first and the second quarter, growth has been trending down, which shows that something is endemically wrong in the economy. “Why it is surprising is that we had election and transition during this period. The kind of momentum one was expecting when the government has just transferred power to itself was not there,” he noted. Crude oil which trended down -2.69 per cent between April and June this year also had adverse impact on the Nigerian economy. Oil pricedipped further to $61.78 per barrel on Friday. This was worsened by the country’s crude production dropping to 1.98 million barrels per day in Q2 2019 from 1.99 million in the previous quarter. The Nigerian economy is heavily dependent on oil, which constitute over 90 per cent of its external earnings, although the current administration has been making frantic effort to grow the non-oil sector of the economy.
Mr. Johnson Chukwu, Managing Director, Cowry Asset Management told BusinessHallmark that there are no indications yet that the economy would grow in a faster pace due to lack of clear economic policy, as the recently inaugurated ministers are just trying to settle down. “The country’s economic growth depends on the economic policies the government come up with. The ministers have not pronounced policies. So, we don’t have a clearly defined economic policy direction. The economy is driven by policies and drivers of these policies,” he claimed. The absence of definite economic direction since President Buhari was inaugurated for a second term on May 29, which has created economic uncertainty, has constrained investors to the sideline. Low investor confidence has had a hard hit on the country’s equity market, causing it to lose -13.63 per cent this year. The Nigerian Stock Exchange, which shed -1.38 per cent last week to 27,146.57 index point, is only second to Luxembourg which has lost -16.04 per cent this year as the world worst performed exchange.
Nigeria’s precarious economy was reflective in the -31.41 per cent dip to $5.82 billion in its capital importation for the second quarter when compared to the previous quarter, although higher by 5.56 per cent year-on-year. The decline in the country’s capital importation between April and June was impacted by -8.41 per cent and -8.15 per cent shrink in Foreign Direct Investment (FDI) and equity respectively. Portfolio investment into the country also fell almost -40 per cent during this period. Meanwhile, while the country’s population has been growing 2.6 per cent annually, unemployment rate stood at23.10 per cent as at September 2018, although President Buhari recently said his administration has lifted over 3 million out of unemployment in the last three years. But high unemployment rate has been attributed to the high crime rate that is prevalent in the country. More so, the two months consecutive decelerations in inflation rate to 11.08 per cent in July on the back of lower food prices, has not motivated commercial lenders to extend more credit to the private sector. Credit to the private sector declined -2 per cent to N24.27 trillion in July.