Economic experts fear stricter times as the challenges of the oil sector pose a threat to Nigeria’s Gross Domestic Product (GDP) record.
This is as the Third Quarter, Q3 2022 growth rate declined by 1.78 percent points from the 4.03 percent growth rate recorded in Q3 2021 and 1.29 percent points, relative to 3.54 percent in Q2 2022.
This is also the case with Nigeria’s revenue profile which declined in October, according to the Federation Account Allocation Committee report.
Data from FAAC said the Value Added Tax (VAT) and Companies’ Income Tax (CIT) increased significantly, while Oil and Gas Royalties, Petroleum Profit Tax (PPT) Import Duty recorded considerable decreases. However, Excise Duty increased marginally.
The National Bureau of Statistics (NBS) said Nigeria’s GDP witnessed a 2.25 percent increase in the third quarter of 2022 on a year-on-year basis, representing the slowest growth rate since the 2020 COVID-19 pandemic.
DAILY POST learnt this on Thursday at Nigerian Gross Domestic Product Report Q3 2022 released in Abuja.
In perspective, the growth rate declined from 4.03 per cent in the third quarter of 2021.
Similarly, the critical sector witnessed a decline; for instance, the oil sector recorded 11.94 percent compared to the figure in 2021; The ICT sector recorded 15.35 percent, a drop of 18.44 percent it added in Q2, 2022.
The Non-oil sectors’ growth grew by 4.27 per cent, 0.50 per cent points lower than the second quarter of 2022. The slow growth is attributable to the base effects of the recession and the challenging economic conditions that have impeded productive activities.
In nominal terms, aggregate GDP stood at N52.26 trillion in the quarter under review, representing a 15.83 per cent growth compared to N45.11 trillion recorded in the corresponding period of 2021. Q3 2022 growth is higher compared to 15.03 per cent and 15.41 per cent recorded in Q2 2022 and Q3 2021, respectively.
In the oil sector, the decline in productivity appears to have reflected challenges on the fortune on the GDP records as the industry recorded -22.67 per cent (year-on-year) as of Q3 2022, indicating a decrease of 11.94 per cent points relative to the rate recorded in the corresponding quarter of 2021.
Also, the growth rate decreased by 10.91 per cent points compared to the 11.77 per cent contraction recorded in the previous period.
The oil sector contributed 5.66 per cent to the total real GDP in Q3 2022, down from the figures recorded in the corresponding period of 2021 and the preceding quarter, where it contributed 7.49 per cent and 6.33 per cent, respectively.
In the third quarter of 2022, Nigeria recorded an average daily oil production of 1.20 million barrels per day (mbpd), lower than the average daily production of 1.57mbpd recorded in the same quarter of 2021 by 0.37mbpd. It is also lower than the 1.43 Mbps recorded in the previous quarter.
On the other hand, the non-oil sector grew by 4.27 per cent in real terms during the reference quarter (Q3 2022). This rate was lower by 1.18 per cent points compared to the rate recorded in the same quarter of 2021 and 0.50 per cent points lower than the second quarter of 2022.
Growth in the non-oil sector was driven mainly by Information and Communication (Telecommunication), Trade, Transportation (Road Transport), Financial and Insurance (Financial Institutions), Agriculture (Crop Production). and Real Estate, accounting for positive GDP growth.
In terms of contribution to GDP, the non-oil sector contributed 94.34 per cent to the total GDP, an increase from 93.67 per cent recorded in the previous sector, while the oil sector contributed 5.66 per cent to the aggregate real GDP for the period.
Nigeria’s mining sector suffered a decline in economic productivity, causing a -21.31 per cent growth decline as of Q3 2022.
This was disclosed in the Q3 GDP report released earlier today by the National Bureau of Statistics (NBS).
The contribution of the mining and quarrying sector to the GDP dropped to 5.90 per cent in Q3 2022. This is lower by 10.75 per cent points and 10.21 per cent points, respectively, compared to the figures for Q3 2021 and Q2 2022.
“Quarter on quarter, the growth rate recorded was – 0.63 per cent. The contribution of Mining and Quarrying to Real GDP in the quarter under review stood at 5.90 per cent, lower than the rate of 7.66 per cent recorded in the corresponding quarter of 2021 and lower than the 6.51 per cent recorded in the second quarter of 2022,” the report said.
The Mining & Quarrying sector consists of Crude Petroleum and Natural Gas, Coal Mining, Metal ore and Quarrying and other Minerals sub-activities. NBS stated that the industry grew nominally by 34.26 per cent (year-on-year) in Q3 2022. And the nominal growth was led by the oil and gas sub-sector.
“Quarrying and Other Minerals exhibited the highest growth rate of all the sub-activities at 62.52 per cent, followed by Metal Ore activity at 51.47 per cent.
“However, Crude Petroleum and Natural gas was the main contributor to the sector with a weight of 87.52 per cent in Q3 2022,” the report states.
Comparing Q3 2022’s rate of growth relative to Q3 2021 and Q2 2022 growth rates, there was a rise of 38.91 per cent points and a fall of 15.49 per cent points, respectively.
Activities in the Nigerian Information and Communications Technology (ICT) sector contributed 15.35 percent to the country’s real Gross Domestic Product (GDP) in Q3 2022, representing an increase in contribution when compared with the 14.20 per cent recorded in the same period last year. However, every quarter, the sector recorded a decline in real GDP contribution compared with the 18.44 per cent it added in Q2, 2022.
The ICT sector recorded 15.35 per cent, a decline of 18.44 per cent, it added in Q2, 2022.
According to the NBS, the ICT sector comprises the four activities of Telecommunications and Information Services; Publishing; Motion Picture, Sound Recording and Music Production; and Broadcasting.
While the ICT sector recorded a growth rate of 10.53 per cent in real terms year on year in the quarter under review, the growth was primarily driven by activities in the telecommunications sub-sector, which contributed 12.85 per cent to the GDP in the real term.
Further breakdown of the report showed that the agricultural sector contributed 29.67 per cent to the aggregate GDP, an increase from 23.24 per cent recorded in the previous quarter and a 29.94 per cent decline compared to the same period in 2021.
Industries, on the other hand, recorded a decline in their contribution from 19.4 per cent in Q2 2022 to 18.37 per cent in the review quarter. Meanwhile, services contributed 51.96 per cent to the national GDP, a significant drop from 51.35 per cent in Q2 2022.
The decline in Nigeria’s GDP growth indicates a drop in productivity in the economy due to the recurrent contraction in the oil sector and the low growth in key non-oil sectors such as transportation, banking, and education. This implies that Nigeria’s economic activities grew in the third quarter compared to the corresponding period of 2021, albeit at a slower pace compared to the previous period. The Q3 2022 growth (2.25 per cent) represents the slowest GDP growth in the last six quarters.
2023 will be challenging year for Nigeria citizens- Experts
In a chat with DAILY POST on Thursday, a Financial Inclusion/Wealth Management expert, Mr Idakolo Gbolade said 2023 would be a challenging year for Nigeria.
He said, “The growth is likely to decline further in Q4 because the slowing economic growth is significant due to inactivity and slump in oil production and other critical productive sectors of the economy.
“The sluggish growth can also be attributed to the non-oil sector, whose growth covers the oil sector. This report also shows that the government’s significant policies are not yielding the desired outcome as food inflation, energy cost, and cost of production are expected to rise.
“Nigerians should be prepared to face tougher times this yuletide as the cost of food experiences a higher percentage increase in 10 years.
“With inflation biting harder and the cost of goods and services increasing, the impact will bring untold hardship on the people coupled with elections next year. The present government might not achieve much before its tenure expires.
“The Year 2023 will be a challenging year for our economy, and budget implementation might not be achieved.”
Also, a don of Accounting and Financial Development at Lead City University, Ibadan, Prof Godwin Oyedokun said the GDP slow growth shows that the country is not working.
He said, “The issue of GDP is a very critical one. If you look at what is going on in the Country, there is no way we can’t have slow growth. I don’t want to be a prophet of doom, but things are not working; if things are working, it will affect all the economic parameters and fundamentals. The slow growth we witness, we should thank God for it.
“A formidable way of measuring growth is via GDP. Everything factored in GDP parameters must work well to get our priorities right.
“Government should be careful and do better for the Country. I wonder what legacy this present government would tell others they’ve achieved.
“In summary, the slow growth in GDP is due to the fundamentals like inflation and sluggish economic activities accumulated to the slow growth.
“If the government is doing well, economic activities will do well, but things are not going well in this case. Inflation is deep in the productivity sector; there is no productivity.”
Oil theft, non-oil revenue remittances, inflation, and insecurity point to Nigeria’s economic misery
Still, the revenue and allocation decline has worsened the Nation’s woes. For instance, October revenue allocation among the Federal, State, and Local government councils declined.
The Federal Government, States and local government councils got N736.782 billion from the Federation Account Allocation Committee (FAAC) in October.