On Tuesday 28th of February 2017, the National Bureau of Statistics released its annual GDP figure for 2016. According to the report, Nigeria’s economic growth contracted by -1.51 percent for the year ended December 2016, representing the country’s first negative GDP growth since 1991. From research, Nigeria’s highest GDP growth rate remains 14.6 percent, which was recorded in 2006.
“In the fourth quarter of 2016, the nation’s Gross Domestic Product (GDP) contracted by -1.30 percent (year-on-year) in real terms, from 18,533.75 billion naira in the fourth quarter (Q4) of 2015 to 18,292.95 billion naira in Q4 2016. This decline was less severe than the decline recorded in the previous quarter, of -2.24 percent, but was nevertheless lower than the growth rate recorded in the final quarter of 2015, of 2.11 percent,” an excerpt from the report reads.
According to NBS, this contraction in GDP reflects a difficult year for Nigeria, which included weaker inflation, induced consumption demand, an increase in pipeline vandalism, significantly reduced foreign reserves and a concomitantly weaker currency, and problems in the energy sector such as fuel shortages and lower electricity generation.
How the oil and non-oil sector fared in 2016
The oil sector
According to NBS, for the full year 2016, oil production was estimated to be 1.833mb/day, compared to 2.13mb/day in 2015. This reduction has largely been attributed to vandalism in the Niger Delta region. As a result, the sector contracted by -13.65 percent; a more significant decline than that in 2015 of -5.45 percent. This reduced the oil sector share of real GDP to 8.42 percent in 2016, compared to 9.61 percent in 2015.
The non-oil sector
For the full year 2016, the non-oil sector declined by -0.22 percent in real terms, compared to a growth rate of 3.75 percent in 2015, a difference of 3.97 percent points.
The sector to weigh on non-oil growth the most was Real Estate, which declined by -9.27 percent and contributed to –0.77 percent points to year-on-year growth in total real GDP. However, Manufacturing, Construction, and Trade also made significant downwards contributions, ameliorated slightly by continuing strong growth in Agriculture (especially crop production).
Given that the growth rate was stronger in the non-oil sector than in the oil sector, the non-oil sector increased its share of GDP to 92.85 percent, from 91.94 percent in the fourth quarter of 2015.
How these key sectors in Nigeria fared in 2016
The Agriculture sector is made up of four sub-activities: crop production, livestock, forestry and fishing with crop production being the largest contributor of the sector. In the fourth quarter of 2016, crop production accounted for 88 percent of the sector.
According to NBS, in nominal terms (without taking inflation into account), the sector grew by 6.45 percent year-on-year. This was 3.05 percent points lower than the growth rate recorded in the fourth quarter of 2015, and also 0.92 percent points lower than that recorded in the third quarter.
During the quarter under review, Agriculture contributed 21.26 percent to nominal GDP. This was lower than 22.56 percent shares recorded in the corresponding period of 2015 and the 24.09 percent recorded in the previous quarter at 22.56 percent.
Mining and Quarrying
The Mining and Quarrying sector has four sub-activities, which are crude petroleum and natural gas, coal mining, metal ore and quarrying and other minerals. On a nominal basis, the sector grew in the fourth quarter of 2016 by 54.68 percent (year-on-year). This was substantially above the -35.12 percent growth rate recorded in the corresponding quarter of 2015. This increase may be attributed to a drop in Niger Delta militant attacks as well as drop in oil infrastructure vandalism following series of negotiations.
In real terms, the Mining and Quarrying sector recorded a decline of -12.04 percent (year-on-year) in the fourth quarter of 2016. Although this is a significantly smaller decline than that recorded in the previous quarter, of 21.64 percent. However, it is 3.99 percent points lower than the growth rate recorded in the same quarter of 2015 of –8.05 percent.
There are over thirteen activities in Nigeria’s Manufacturing sector, which include: oil refining, cement, food, beverages, tobacco, textile, apparel, footwear, wood and wood products, pulp paper and paper products, chemical and pharmaceutical products, nonmetallic products, plastic and rubber products, electrical and electronic, basic metal and iron and steel and motor vehicles and assembly.
NBS revealed that for the full year 2016, the manufacturing sector in real terms contracted by 4.32 percent compared to a decline of 1.46 percent recorded in 2015.This reflects a number of challenges face by manufacturing in 2016, such as higher costs of imported inputs as a result of the exchange rate, and higher energy costs as a result of a fall in electricity generation, and more expensive fuel.
Information and Communication
The Information and Communication sector is made up of telecommunications and information services, publishing, motion picture, sound recording and music production, and broadcasting. The sector grew year on year by 1.38 percent in real terms in the fourth quarter of 2016, compared to 4.2 percent in Q4 2015 and 1.1 percent in Q3 2016. The main drivers of this growth were telecommunications, information services, and broadcasting.
NBS report showed that for the full year 2016, information and communication grew by 1.95 percent compared to 6.22 percent in 2015. The sector contributed 11.57 percent to total real GDP in Q4 2016, higher than 11.26 percent recorded in the same quarter of the previous year, and higher than 10.14 percent recorded in the preceding quarter.
Finance and Insurance
The Finance and Insurance Sector consists of the two subsectors: financial institutions and insurance firms. In nominal terms, financial institutions account for 87 percent of the sector and insurance firms account for 13 percent of the sector.
For the full year 2016, this sector in real terms contracted by –4.56 percent compared to a growth of 7.12 percent in 2015. This was driven by a –5.57 percent contraction in financial institutions real GDP.
Trade recorded negative year-on-year growth of -1.44 percent. This was a larger decline than that recorded in the previous quarter of -1.38 percent, as well as a fall in growth compared to the rate of 4.69 percent recorded in the fourth quarter of 2015.
According to NBS, the full year 2016 Real GDP contracted by -0.24 percent, which was 5.38 percent points lower than the growth of 5.14 percent recorded in 2015. In real terms, Trade’s contribution to GDP was 16.65 percent in the fourth quarter of 2016, slightly lower than the 16.68 percent it represented in the previous year, but higher than the 16.39 percent recorded in 2016 third quarter.
What the presidency said about the recent GDP figures
In response to the report released by the National Bureau of Statistics, the Presidential Adviser on Economic Matters, Dr Adeyemi Dipeolu and Senior Special Assistant on Media, Publicity to the President, Office of the Vice President, Laolu Akande, expressed optimism on the economy coming out of recession and the several reasons why this growth was seen.
The Presidential Adviser on Economic Matters, Dr Adeyemi Dipeolu said, “These figures reflect the slow-down in the economy for most of 2016 but also show that the recession may have bottomed out because of an improving trend in several key sectors.
“Overall, the Nigerian economy performed better than expected even though we are still in the early stages of recovery. It is indeed noteworthy that overall 2016 growth was higher with a contraction at -1.5% than the -1.8% predicted by the IMF.”
Laolu Akande, the Senior Special Assistant on Media, Publicity to the President, Office of the Vice President, said, “The report had raised the hope that the recession may have bottomed out with the improving trends in several key sectors of the economy including agriculture and mining.
“The Buhari administration is also hopeful that with the ongoing series of engagement with the oil-producing communities of the Niger Delta, the increased oil production output would be sustained.”
“In a similar vein, the ongoing implementation of the Social Investment Programmes, the significant infrastructural spending of the Federal Government, and a possible early legislative passage of the 2017 budget are all expected to spur a positive multiplier effect on the Nigerian economy.”
“The Buhari administration will not relent in its determined effort and its comprehensive approach to bring about the full recovery of the Nigerian economy and set it on a solid path of sustainable growth. Our work continues and we renew the pledge to do it with diligence, and the firm commitment it deserves.”