Weak Oil Sector Slows Down Nigeria’s Economy, Says LCCI
The Lagos Chamber of Commerce and Industry (LCCI) has stated that the weak performance of the oil sector is slowing down Nigeria, resulting in the low growth of the economy.
Despite this, the Director General of the chamber, Chinyere Almona said the economy has maintained a positive growth trend in 2023, citing figures from the National Bureau of Statistics (NBS).
Nigeria’s oil sector has been plagued by theft, vandalisation, and other vices, resulting in a 0.85 percent contraction and dropping to 12.58 percent in the third quarter of 2023 from the 13.43 percent recorded in the previous quarter.
In the same quarter, the non-oil sector grew by 2.75 percent and was the major driver of the positive growth recorded in the economy.
Although the non-oil sector growth was lower by 0.84 percentage points to the 3.58 percent growth rate recorded in the second quarter of 2023, in real terms, the non-oil sector contributed 94.52 percent to the nation’s GDP in Q3 2023, though lower than the 94.66 percent reported in Q2 2023.
Almona in the 2023 Annual Report of the Chamber noted that the low growth in the economy also features a sharp increase in price levels largely driven by fuel subsidy removal, consistent depreciation of the naira, and increases in food prices.
She noted that the Nigerian economy in 2023 was significantly influenced by global and domestic developments. “Some of the impacting global developments include Russia – Ukraine War, rising coups and coup attempts in Africa, Israel – Hamas War, elevated global inflation and a sharp tightening of monetary policy in response, slow China’s recovery, global capital flight and overlapping shocks of the coronavirus pandemic.”
The economy was also affected by elections and election-related activities, persistent inflationary pressures and very high monetary policy rates, foreign exchange crisis, high levels of fiscal debt, and low GDP growth, which have also contributed to the slow growth which the LCCI D-G, said have impeded productive activities.
Some developments in the year either enabled the business environment or made it more challenging.
This year, the country signed the Electricity Act 2023 which seeks to provide a comprehensive legal and institutional framework for a competitive electricity market, improve access to electricity, promote the use of renewable energy, and the attraction of investments.
Also in the year, the Data Protection Bill was signed into law. The Act establishes the Nigeria Data Protection Commission (NDPC) and empowers individuals to seek redress in the event of a data breach. The Act emphasizes the fair, lawful, and accountable processing of citizens’ data.
The economy was also characterized by high operating costs influenced by the deregulation of fuel prices and the floating of the exchange rate. Other developments such as weak liquidity in the foreign currency market, uncertainty about the direction of the nation’s economic and fiscal policy, redesign of the country’s currency, and heightened insecurity foretold serious challenges for the economy in 2023.
Statistics from the NBS show that the non-oil sector, comprising Finance and insurance, Telecommunication, Utilities, Arts and entertainment, Construction, Accommodation & Food Services, Administrative & Support Services, Professional Services, Public Administration, Real Estate, Trade, Agriculture and Manufacturing, grew by 2.75 per cent, and was the major driver of the positive growth recorded in the third quarter of 2023.
The NBS figure also noted that the Gross Domestic Product (GDP) grew by 2.54 per cent in the third quarter of 2023, slightly higher than the 2.51 per cent in the previous quarter. The growth rate is higher than the 2.25 per cent recorded in the corresponding quarter of 2022. The slower pace of growth reflects the challenging economic conditions that have impeded productive activities.
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