Nigeria’s economy is far more fragile today and economic growth severely constrained leading business managers and investors were told in Lagos yesterday.
Africa’s largest economy existed a devastating economic recession last year but growth data have been unimpressive and with elections approaching, Nigeria’s chief executives should now have a lot to worry about the outlook for their operations.
At the June monthly breakfast meeting of the Lagos Business School Wednesday, Bismarck Rewane of the Financial Derivatives company and Dr Doyin Salami who teaches economics at the school both cautioned business leaders to enter into long term contracts with great care.
Nigeria’s Q1 GDP figures released showed growth slowing and brought back memories of the recession but now some of the nation’s leading economists have highlighted emerging symptoms of the fragility of the economy.
Rewane said the GDP data show how Nigeria’s is failing to spur growth in key economic sectors with significant potential for creating badly needed jobs for the nation’s idle youth population.
According to official data, youth unemployment rate in Nigeria increased to 33.10 percent in the third quarter of 2017 from 29.5% in the second quarter of 2017. Youth unemployment rate in Nigeria averaged 21.7% from 2014 until 2017, reaching an all time high of 33.10 percent in the third quarter of 2017 compared with a record low of 11.70 percent in the fourth quarter of 2014.
While the oil sector is growing on the back of rising oil price and stable production levels, services and real estate sectors are either slowing or actually contracting sharply, reversing any push towards economic inclusiveness.
Salami on his own raised concern about the collapse in productivity in agriculture, saying, “what we are actually seeing is a poverty strengthening growth.”
Nigeria has seen its PMI numbers falling recently and with new excise duty on alcohols, which took effect this week; the beverage sector is expected to face a fresh bout of challenges in the midst of declining disposable income levels.
While inflation data for May will show a welcome drop below 12% for the first time in years, the expected government-spending splurge ahead of the elections may wipe out some of the improvements in inflation.
On the positive side, the Central Bank appears determined to provide the supply the foreign exchange market needs to keep rates stable with data showing the apex bank pumped $1.43bn into the market in May compared to $837m the previous month, a month on month increase of about 70%.
While bank lending continues to be constrained, liquidity in the system is getting fresh impetus from FAAC disbursements, which at N701bn is at a four year high.
