The recent announcement of 1.4 percent growth in the Nigerian economy by the National Bureau of Statistics was received in the government circles as a major leap in their efforts to rebuild the broken down Africa’s top economy. 
As soon as the announcement was made, top government officials went into a frenzy to beat their chests for a work well done. While many people also considered the improvement in the economy in the third quarter of the year as good news in view of the fact that up until the second quarter, the economy merely exited recession with 0.72 percent GDP growth. However, the truth is that the growth was not as significant as being celebrated in the sense that the recovery in the global oil price was the main driver of the growth.
An analysis of the NBS reports showed that the 1.40 percent acceleration in the country’s GDP was better than the previous quarter’s figure and exceeded the 0.8 percent projection by the International Monetary Fund, the downside, however, remains the dominant role of the oil sector in the growth. However, a closer scrutiny of the GDP report showed that the non-oil sector contracted by -0.8 percent in the third quarter compared with 0.5 percent growth in the previous quarter while the oil sector grew by 25.9 percent against 3.5 percent in the second quarter of the year.
The GDP data therefore reflected the general perception that the country’s continuous dependence on oil is rather not cheering news because of its vulnerability to any shock in the global price of the commodity. It means that the oil sector is still critical for Nigeria sustaining positive growth in the economy at least in the near term. Global oil price is currently at around $56-$60/barrel, higher than the $44/and $45/barrel benchmark in this year’s and the estimates for 2018 budget. If the oil price remains at the present level, it will sure provide the much needed headroom to stabilise the economy and further push it up in the coming months, but again it reminds one of where we were coming from. It is therefore fair to predict that if there is another unpleasant development in the international oil market today, it is certain that the Nigerian economy may spin back into the negative territory and wipe off some of the gains recorded by the economy in recent times. The lacklustre performance of the non-oil sector to the economic growth is an indictment of the overrated efforts by the government to diversify the economy.
Although it will be unfair not to acknowledge some of the little gains so far recorded by the government in the field of agriculture with the increased production of rice due to support for farmers; the fact remains that the government is not moving as fast as it should to rescue the nation from economic hardship caused by years of neglect and bad policy and governance. At 1.4 percent GDP growth rate, the economy is not growing as fast as our population rate, which is growing at 2.6 percent annually. The point here is that the government needs to grow the economy higher than the population rate for the people to feel the impact. Some experts are of the view that much of the slow growth in the non-oil sector is as a result of a regime of high interest rate which has stifled production output growth. Cost of funds is considered very high and discouraging to local capacity in the productive sector, making importations of finished goods still very attractive. The high interest rate regime has also continued to hurt growth in the non-oil sector and when combined with the weak currency, local capacity remains under threat. Many hitherto local manufacturers have since discovered that it is more profitable to import the finished products in the guise of raw materials and merely assemble them here. For the crooked ones among them, they simply obtain the foreign exchange at the official rate and round-trip back to make a kill at the black market. The resultant effect is the uninspiring performance of the critical sector of the economy.
The implication of the weak performance of the critical sector is the impact it has created with resultant effect of unemployment and poor standard of living in the country today. Without significant growth in the local capacity to produce essential items, the mining, service and agriculture sectors, Nigerians will continue to groan under the yoke of economic hardship.
The non-oil sector is critical to employment generations and government’s efforts to stimulate growth and with its attendant spiral impact on the standard of living in the economy. It is also right to commend government’s efforts at maintaining peace in the Niger Delta region, which has helped the country to benefit from the price recovery in the international oil sector.
The recovery in the global oil price has helped the government to stabilise the currency crisis that pushed the economy into recession for five consecutive quarters, while the dollar flow from government external borrowing coupled with improvement in offshore portfolio investment flow has equally helped boost the country’s external reserves to about $35 billion. The government’s optimism that the country’s economy will continue to grow further in the fourth quarter of the year on the back of increased global oil price and crude production output put at 1.9 mbpd was encouraging news to the ear. Financial insiders said as long as the economy was exposed to oil shock, it would be difficult to put it on the path of sustainable growth. Many therefore believe that one of the ways to grow the economy is by improving efforts to expand the tax net in order to boost government revenue and increase spending on critical sector necessary to stimulate the economy.
Government should also enact policies that will improve local manufacturing capacity and provide more support for the agro-allied sector to boost self-sufficiency and food security and also encourage export of more commodities outside of crude oil to increase foreign exchange inflows. Many people are of the view that government should expand the scope of its reform in the agro-allied sector to incorporate mandatory local processing of some of the commodities before they are shipped out so as to help boost foreign exchange earnings from the non-oil sector.
The fact that we still export crops like cocoa, cashew nuts and other agricultural commodities in their raw forms should be discouraged and government should put in place necessary policies to promote value added to our farm produce to enhance the commodity value in the international market. Essential to fast-tracking economic growth requires that government should kick-start genuine support for the private sector initiative in the development of the critical infrastructure such as road, power generation and the opening up of the rural areas to promote sustainable growth and bring relief to millions of Nigerians who are groaning under the yoke of economic hardship. No economy can survive with a mono-economy and as such the government should roll out policies to promote more direct foreign investment in the critical areas rather than use the high interest rate regime to attract portfolio investors who will fly away at the least signs of unfavourable development in the global economy.
Capital flows to where it is needed and can give bountiful returns and therefore, the government should continue to work on its efforts to improve on the ease of doing business initiative so as to encourage long-term capital flow into the economy. The central bank should commence as soon as practicable a gradual easing of its tight monetary stance to free more funds to private sector operators to improve on their production capacity. An alignment of the exchange rate policy to eliminate multiple rates should be an urgent step to curb arbitraging and excessive rent on the economy by the elites and the privileged few.
The government should continue its engagement with the Niger Delta critical stakeholders to nip in the bud any crisis in the region to be able to sustain production output at a level sufficient to increase foreign exchange earnings from oil export. Also, a prudent deployment of the increased earnings from crude oil exports to support efforts to diversify the economy will go a long way to improving economic growth.
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