October 10, (THEWILL) – Nigeria’s GDP growth does not indicate increased output that could reflect on job creation. Positive growth in gross domestic product (GDP) normally indicates that producers in the economy are hiring new staff for the increased output being generated. This isn’t the case in Nigeria where an impressive output growth of five per cent in the second quarter of 2021 sums up to a jobless growth.
The National Bureau of Statistics reports that economic activities have come near the levels they were prior to the Covid-19 –induced lockdown in 2020. There has been a substantial return of commercial activities in the country, but the improve- ments have happened without a return to the prec-risis employment levels. Economic growth here is driven by a few low-job generating service sectors and industries. And the output growth was achieved in an environment in which cutting jobs and personnel expenses is a bandwagon strategy in both industrial and service sectors of the economy.
Had there been a balanced growth in the labour intensive industrial and agricultural sectors, a GDP growth that high is rightly expected to impact the economy reasonably in key dimensions of which new job delivery is number one. Other expectations include substantial improvement in consumer spending power, positive supply side effect on inflation and reduction in poverty. To the contrary, the economy grew while these economic and social indicators continued to deteriorate.
The explanation is found in the uneven growth across sectors and industries and, more fundamentally, in the structural defects where a few large industries dominate the economy. But industries, both large and small, are doing essentially the same thing: squeezing reduced staff numbers to grow output. A number of them aren’t even regular on paying the workers. At five per cent output growth, Nigeria shows the highest quarterly growth numbers since the 5.9 per cent GDP growth record in the fourth quarter of 2014. It marks three straight quarters of positive growth from the 6.1 per cent and 3.6 percent con[1]tractions the economy recorded in the second and third quarters of 2020, respectively. The growth rate beat analysts’ projection of 3.6 per cent for the second quarter. The problem, however, is that the growth driving sectors are mostly service-based activities with low job creating capacity.
Real GDP growth in the second quarter is led by road transport that grew by 92.4 per cent year-on-year, shooting up all the way from a 51.4 per cent contraction in the same period in 2020, and from a decline of 23.7 per cent in the first quarter of 2021. This is followed by electricity, gas steam and air conditioning supply, which grew by 78.2 per cent, from a three per cent decline in the same period in 2020.
Rail transport and pipelines grew by 53.3 per cent in the second quarter, another upswing from a decline of 63.3 per cent in the second quarter of last year. Wholesale and retail traded grew by 22.5 per cent, against a contraction of 16.6 per cent in the same period in 2020. Other service-based growth leading industries include water supply, sewage and waste management services, which grew by 18.5 per cent; insurance – which grew by 15.7 per cent and telecom and information services, which improved by 5.9 per cent in the second quarter.
While service sectors led the growth in GDP, the job creating sectors and industries stayed in the negative or low growth territories of the economy. Mining and quarrying sector, which is dominated by crude petroleum and natural gas, declined by 12.3 per cent in the second quarter of 2021. The contraction is led by crude petroleum and natural gas production, which declined by 12.7 per cent over the period. This marks the fifth straight quarter of output contraction in the sector since the second quarter of last year.
The sector’s contribution to real GDP has dropped from 9.1 per cent recorded in the same quarter in 2020, to 7.6 per cent this year. Average daily oil production is down from previous highs, to the lowest levels in years in the 1.6 mbpd region, where it has hovered since the third quarter of 2020. The oil sector’s contribution to GDP has therefore dropped from 8.9 per cent in the second quarter of last year, to 7.4 per cent in the second quarter of 2021. The labour intensive agricultural sector closed the second quarter with a dismal growth of 1.3 per cent year-on-year.
This is one of the worst growth records for the sector since 2016, measuring well below a five-year average real growth rate of 2.1 per cent. It is a reflection of the damaging impact of security challenges on agricultural activities across the country. The worst affected agricultural activity is live[1]stock, which dived from a 2.3 per cent growth in the second quarter of last year to 0.1 per cent in the second quarter of this year.
The poor performance of agriculture indicates a significant loss of ground in the role of the sector in providing jobs to a large segment of the population and in supplying food to the citizens. The sector’s contribution to overall real GDP has declined from 24.7 per cent in the same period in 2020, to 23.9 per cent. The development is interpreted to mean that runaway food inflation isn’t likely to slow down any time soon.
The seemingly impressive GDP growth of five per cent is viewed as meaningless in the face of growing food scarcity and intensifying hunger. The inability of agricultural activities to contribute meaningfully to the overall real GDP growth is underscored as the critical factor underpinning the economy growing without generating jobs. Oil refining operations remain a quiet front, with some of the highest contraction records maintained for the past five quarters running. It con[1]tracted by 46.8 per cent in the second quarter. This is even the lowest rate of contraction recorded in oil refining since the second quarter of last year. As with agriculture, there is a high sense of apprehension that petroleum refining – a major industry with high capacity for direct and indirect job stimulation in the economy – isn’t part of the GDP growth so far this year. It never has been for the three consecutive quarters of positive GDP growth. Industrial activities comprising the job-creating operations of construction, mining and quarrying, manufacturing and others, contracted by 1.2 per cent in the second quarter of 2021. Except for a slight positive growth in the first quarter, the industries group has been declining since the second quarter of 2020.
•Uzor is an Economist and Financial Analyst
About the Author
