The non-oil sector of the Nigerian economy which is still the main driver of the country’s real Gross Domestic Product (GDP) growth in 2014 have seen slow growth despite efforts to diversify the economy away from oil.
The oil price plunge has forced energy companies all over the world to rewrite their investment plans, and caused a major slowdown in the US shale oil industry. But it has also thrown the fiscal balances of big oil producers such as Nigeria, Venezuela and Russia into disarray.
Nigeria’s non-oil sector growth slowed in the fourth quarter of 2014. The sector recorded 6.44 percent growth in real terms, lower when compared to the 8.78 percent recorded in the corresponding period in 2013, and the 7.51 percent recorded in the third quarter of 2014, data available on the National Bureau of Statistics (NBS) website has shown.
“As for the non-oil economy, the slowdown in growth experienced in the quarter likely reflects weaker consumer demand and some of the impact of currency devaluation,” First Bank Capital said in its February 24 note.
The naira has depreciated 19 percent against the dollar in the past six months, more than any of the other 23 African currencies tracked by Bloomberg.
“We expect to see more evidence when more consumer goods companies report their Q4 2014 (end-Dec) results; the few which have reported their earnings showed marked y/y declines or outright losses.” FBNCapital adds.
Non-oil sector growth was driven by growth in activities recorded in Crop Production, Trade, Textile, Apparel and Footwear, and Real estate sectors.
Crop production which is the main driver of growth in the non-oil sector in the fourth Quarter of 2014, contributing 12.55 percent of the overall GDP growth, National Bureau of Statistics (NBS) said.
Real Gross Domestic Product (GDP) of the economy grew by 5.94 percent (year-on-year) on an aggregate basis in the Fourth quarter of 2014.
Nigeria’s non-oil export earnings fell by 18 percent in December 2014, as the suspension of the Export Expansion Grant (EEG).
“This is not surprising. This cannot be distanced from near paralysis of the EEG scheme,” Ede Dafinone, an exporter and CEO of Sapele Integrated Industries, told BusinessDay.
“The EEG has been largely successful in the last ten years, as exports have grown significantly. But the Negotiable Duty Credit Certificates (NDCC) have not been honoured at the ports for over a year. So I would expect such decline in 2014,” Dafinone said.
The Export Expansion Grant Scheme was introduced in 2005 to push Nigeria’s non-oil exports, as the country seeks economic diversification routes away from the oil sector. The EEG scheme operated by the use of the Negotiable Duty Credit Certificates (NDCCs), which served as cheques for non-oil exporters who wished to benefit from the grant.
The essence of the grant was to reduce production, distribution and logistics costs for non-oil exporters, so as to enable them compete effectively in the international market.
The understanding of the initiators of the scheme was that allowing non-oil exporters to bear the brunt of the costs would make their products uncompetitive in the international market, as goods from other countries, where governments provide different grants, would sell cheaper than those exported from Nigeria.
JOSEPHINE OKOJIE
