Nigeria’s economic recovery continues to remain fragile, as Fitch Solutions, the research arm of Fitch Ratings forecast the country’s real GDP to grow by a weak 1.8 percent in 2021.
This growth performance is slightly below the previously forecast real GDP growth of around 2 percent in March 2021.
Meanwhile, this growth is well below the 3.1 percent average growth forecast for sub-Saharan Africa. Given that oil price levels continue to run bullish in the ensuing months, this will strengthen the government’s fiscal position and net exports.
This notwithstanding, Fitch Solutions surmises that the impact of the growth will be largely offset by the weak domestic consumption (80% of GDP). Accordingly, this results from the slow vaccine rollout and high inflation, approximately 18.1 percent in April. In turn, this will weigh hugely on consumer confidence and purchasing power respectively, Fitch Solutions asserts.
Fitch Solutions further indicates that there is a high likelihood that the Nigerian government will miss its target of vaccinating 70 percent of the population by year end-2022. However, quite a sizable proportion will likely be inoculated to signal the authorities to lift most social distancing measures next year.
Considering the foregoing, Fitch Solutions forecast that the resulting uptick in private consumption will see real GDP growth accelerate to 2.7 percent in 2022.
Available data presented by Nigeria’s National Bureau of Statistics (NBS) show that real GDP growth inched up only slightly to 0.5 percent year-on-year in Q1 2021 from 0.1 percent in Q4 2020.
Comparing growth performance in previous quarters
Based on GDP data from Q1 2021, the Nigerian economy expanded for a second consecutive quarter. This was after it experienced a technical recession in mid-2020. Particularly, at the time, the spread of the Covid-19 virus necessitated control measures such as a lockdown. Thus, real GDP contracted by 6.1 percent in Q2 2020 and 3.6 percent in Q3 2020.
Nigeria’s oil sector which plays a significant role in Nigeria’s growth, although accounting for just 9.3 percent of GDP, contributes around 90 percent of Nigeria’s goods exported. It also contributes 50.0 percent of government revenues, which fell by 2.2 percent year-on-year in Q1 2021, while the non-oil economy grew by a meagre 0.8%. This reflects a gradual, but still weak, normalisation of business activity, Fitch Solutions notes.
On the back of this development, inflation also grew in the various sectors of the economy. According to the NBS, the agriculture sector grew by 2.3% year-on-year in Q4 2020 compared to 3.4 percent in Q4 2020. This reflects slower growth in crop production comparing 2.3 percent and 3.7 percent in Q4 2020.
More so, this is caused partly by rising inequality in several key farming areas in Nigeria’s northern and central states. The industrial sector, after contracting by 7.3 percent in Q4 2020, grew by a weak 0.9 percent in Q1 2021.
On the contrary, manufacturing expanded by 3.4 percent, while the services sector fell by 0.4 percent. The growth figures in these sectors were seen amid the second wave of coronavirus infections, which resulted in a tightening of restrictions.