Q1 2021 Economic Growth Report Puts NBS On Fault Line

Contrary to the pass mark for the economy in the first quarter of 2021 released recently by the National Bureau of Statistics (NBS), the Nigerian economy is, in reality, haemorrhaging, according to players in the real sector, who analysed the report.

While NBS claimed Nigeria’s Gross Domestic Product (GDP) grew by 0.51 per cent year-on-year in real terms in the first quarter of 2021, operators in the real sector have faulted the report as not a true reflection of the state of the national economy.

The NBS had among other things stated in its Q1 2021 Nigerian Gross Domestic Product report that the GDP grew marginally by 0.40 per cent but that performance has been queried by a cross-section of Nigerians as unimpressive.

Speaking against the backdrop of rising inflation especially the cost of staple foods and consumer goods, and continuing low activities in the manufacturing sector, the NBS figures have been criticised for falling short of expectation.

The 0.51 per cent recorded in Q1 2021 is considered to be lower than the 1.87 per cent growth recorded in the corresponding quarter of 2020 even though it was higher than the 0.11 per cent recorded in Q4 2020.

Reacting to the report, the principal umbrella bodies of the manufacturing sector – the Manufacturers’ Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI) – were circumspect with the NBS’ assumption that the economy was improving.

Director-General of MAN, Segun Ajayi-Kadir, said the 0.40 per cent growth rate differential was moderate but urged that caution must be applied because the performance of the economy when examined in light of the 2019 results showed a below-par growth rate.

He noted in particular that the reported 3.40 per cent growth rate of the manufacturing sector in the first quarter of 2021, came as a surprise in view of the numerous challenges faced by the sector.

Ajayi-Kadir argued that there was no evidence of the high level of economic activities in the manufacturing sector that justified the reported 3.40 per cent growth rate during the quarter in review.

According to him, “We are currently experiencing the rising cost of manufacturing inputs, the negative impact of Naira depreciation, shortage of forex, so it is surprising to see a rate higher than the rate of 0.81 per cent in Q1 2019 and 0.43 per cent of Q1 2020 which were relatively stable periods.’’

Speaking further, he said, “Incidentally, even the aggregate Manufacturers CEOs Confidence Index (MCCI), which increased to 49.1 points in Q1 2021 from 42.1 points in Q4 2020, was still below the 50 neutral base points, which indicated that manufacturers only have a little more confidence in the economy.

“This means it will amount to an error of judgment to ascribe better performance by comparing Q1 2021 with Q4 2020, a year like no other that was heavily challenged by COVID-19 and a period that growth was largely driven by the full easing of lockdown, seasonal and festive driven demand for goods and services.

“Let us compare the 0.51 per cent growth rate of Q1 2021 with the 2.1 per cent of Q1 2019, a relatively stable economic period.

“When this is done, it will be clear that the 0.51 per cent reported growth rate is low, even though a positive and reassuring trend.

The D-G of MAN, however, welcomed the 0.40 per cent growth in the GDP, stating that it was an indication that the economy was recovering from the shocks occasioned by the COVID-19 pandemic, and Nigeria was on the path to economic recovery and meaningful growth.

The LCCI on its part though described as ‘‘pleasant surprises’’ the 0.40 per cent GDP growth in Q1 2021, and the recovery of the manufacturing sector from a negative growth territory in Q4 2020 to a positive growth level of 3.4 per cent in Q1 2021, added that the report did not reflect the pains that manufacturers in the country have been going through.

Director-General, LCCI, Muda Yusuf, in reaction to the NBS report, expressed concern that the manufacturing sector had been grappling with the effects of structural, irregular policies, institutional and macroeconomic challenges including foreign exchange illiquidity crisis over the past few months.

“Most foreign exchange-dependent manufacturing sectors have not had a good experience over the past one year. Admittedly, segments of manufacturing with high levels of backward integration had lesser degrees of shocks from the forex illiquidity and exchange rate depreciation in the economy,’’ he said.

Yusuf also listed persistent epileptic supply of electric power as one of the major issues that manufacturers are still grappling with, and cautioned that “Evidently, the economy is still struggling to recover from the shocks of the pandemic and related slip into recession.’’

He, however, commended the expansion of 2. 28 percent in the agricultural sector, 6.31 percent of the Information and Communication Technology (ICT) sector and 8.66 percent of the electricity sector.

“However, the first-quarter GDP data contained a few pleasant surprises. The agricultural sector expanded by 2.28 per cent despite the ravaging effects of insecurity, farmers-herders clashes and the displacement of many farming communities. The growth of 6.31 per cent recorded in the ICT sector was expected given the opportunities created for ICT in the new normal. The cost-reflective tariff appears to have impacted positively on the electricity sector which recorded 8.66 per cent,” the DG of LCCI said.

On the trade sector, Yusuf lamented the continued contraction of the trade sector which recorded negative growth of 2.43 per cent in Q1 2021, the transportation sector at 21.9 per cent, and the hospitality and entertainment sectors.

“We note with concern the continued contraction of the trade sector grappling with headwinds arising from exchange rate depreciation and forex illiquidity, high inflationary pressures, and weak purchasing power. Yet the sector is one of the biggest sources of employment, especially in the self-employment space.

‘‘It is equally worrisome that the transportation sector experienced the worst contraction at 21.9 per cent in the first quarter of 2021. This may be as a result of the growing insecurity on our roads and this goes to demonstrate the multidimensional impact of insecurity on the economy. The hospitality and entertainment sectors have been in recession for over a year and the government needs to do a lot more to salvage the sector from complete collapse,” Yusuf stated.

But against the picture of a booming economy painted by the NBS, it is pertinent to ask what has become of the NBS lately as per the correctness and reliability of its data on the state of the Nigerian economy. Has it gone astray or lost its independence by issuing incorrect statistics?

This is because, when the NBS released the Company Income Tax payment profile of the banking industry for Q1 2021, it ascribed N9,255,990,682.37 for the entire financial service industry, a figure that was far lower than the CIT payment of just six Tier-1 lenders in the banking industry.

According to the analysis of the Q1 results of six banks alone conducted by InsideBusinessNG, it was revealed that six lenders paid a total of N39.69 billion to the Federal inland Revenue Service (FIRS) for the months of January to March 2021 reviewed by NBS.

The NBS had in its first-quarter report for 2021 stated that a total of N392.77 billion was generated by FIRS during the quarter, and that of the figure, Breweries, Botting and Beverages accounted for the highest CIT amounting to N23.26 billion, followed by Professional Services including Telecoms generating N18.17 billion. State Ministries and Parastatals generated N17.35 billion; Automobiles and Assemblies, N73.57 million; Mining, N34.40 million and Textile and Garment, N13.49 million.

But using the Q1 2021 assessment, InsideBusinessNG’s computation showed that, Zenith Bank, Access Bank, FirstBank, Guaranty Trust Bank, United Bank for Africa and Ecobank altogether paid N39.69 billion as CIT. The figure was N30 billion above the N9,255,990,682.37 that NBS declared for the entire financial services sector.

This is not the first time that the GDP growth reports by NBS have been disputed. Only in 2019, economic experts picked holed in the NBS Q1 2019 report where it stated that the economy recorded 2.4 per cent growth in the fourth quarter of 2018, culminating in a GDP of 1.93 per cent for the year, up from 0.82 per cent in 2017.

It said the economy grew at its fastest pace since 2016, both on a quarter-on-quarter basis and a resultant year-on-year basis.

However, a professor of economics and Executive Chairman of, Society for Analytical Economics, Godwin Owoh, punctured the result as politically motivated allegedly because it was released on the eve of a general election in the country.

“That GDP report is not reflective of the real situation in the country’’, he carpeted, stressing, ‘‘How can you tell us that we recorded growth when we have a negative fiscal balance? All the states in the country as well as the Federal Government itself are cash-strapped. The government is insolvent. They are unable to meet their obligations and liabilities to even their workers. We are not seeing increased liquidity but increased debt. There is no growth in the Nigerian economy.’’

Owoh further decried the high unemployment rate in the country as a contradiction of the claim that the economy was growing. His words: “How can you say the Nigerian economy has grown, yet there are no jobs? If there is growth in the economy, there will be stimulation of demand, which means there will be an increase in employment because of that demand. But the opposite is what we have on the ground, people are losing jobs in their millions because factories are closing shops, and you tell me we have recorded growth, no way. That GDP is biased.”