By Mike Abbah
Nigeria’s key revenue and employment generating sectors, namely oil, agriculture and manufacturing, recorded negative or weak growth in the second quarter of the year (Q2 2024) according to the National Bureau of Statistics (NBS). This implies that the critical sectors were in a dire state as they struggled to achieve enhanced and sustainable growth while the economy grappled with multi-faceted challenges.
According to data by the National Bureau of Statistics (NBS) in its Gross Domestic Product (GDP) report for Q2 2024, these sectors recorded either marginal or negative growth during the period, suggesting that the economy is yet to recover from the years of downturn emanating from both extraneous and domestic troubles.
The NBS report showed that the real growth of the oil sector was 10.15% (year-on-year) in Q2 2024, indicating an increase of 23.58% points relative to the rate recorded in the corresponding quarter of 2023 (-13.43%). Growth increased by 4.45% points when compared to Q1 2024 which was 5.70%. On a quarter-on-quarter basis, the oil sector recorded a growth rate of -10.51% in Q2 2024.
Oil production did not show a strong performance, notwithstanding the feeble growth the sector recorded during the period.
The NBS stated that the nation in the second quarter of 2024 recorded an average daily oil production of 1.41 million barrels per day (mbpd). While this is higher than the daily average production of 1.22 mbpd recorded in the same quarter of 2023 by 0.19 mbpd, it is lower than the first quarter of 2024 production volume of 1.57 mbpd by 0.16mbpd.
The Oil sector contributed 5.70% to the total real GDP in Q2 2024, up from the figure recorded in the corresponding period of 2023 and down from the preceding quarter, where it contributed 5.34% and 6.38% respectively. Notwithstanding the relatively smaller contribution to the GDP, the sector remains Nigeria’s lifeblood and major revenue earner.
According to Statista, a global data and business intelligence platform, over 91 percent of the value of Nigeria’s export was generated by the oil sector, accounting for over $60 billion in 2023.
Nigeria’s crude oil production made significant recovery in the first quarter of 2024, with the country raising its export of the commodity by 50.2 per cent to N15.4 trillion during the period. Data from NBS showed that the value of the country’s sales of crude oil to other nations rose from N10.3 trillion in Q4, 2023 to a cumulative N15.4 trillion in Q1, 2024.
A breakdown of the Q1, 2024 export data indicated that in January alone, Nigeria sold N5.2 trillion worth of oil, higher than all its export value for Q1, 2023, increasing it to N5.4 trillion in February, but with a marginal fall to N4.8 trillion in March of this year.
Massive divestment, low investment and continued crude oil theft combined to neutralize the fortune of the oil sector contributing to the nation’s economic and revenue challenges, hence the clamour for diversification to agriculture.
“Nigeria remains an oil-dominated economy, irrespective of the trumpeted hype of diversification. The right environment and incentives do not exist for adequate diversification which, for now, is shallow and half-hearted. The poor performance of the key real sector segments is troubling,” said Engr. Gregg Akande, an oil and gas expert.
Concerning agriculture, four sub-activities make up the sector: Crop Production, Livestock, Forestry and Fishing.
The agricultural sector in the second quarter of 2024 grew by 1.41% (year-on-year) in real terms, a decrease of 0.09% points from the corresponding period of 2023, and an increase of 1.22% points from the preceding quarter which recorded a growth rate of 0.18%. It grew on a quarter-on-quarter basis at 7.35%.
However, the sector contributed 22.61% to overall GDP in real terms in Q2 2024, lower than the contribution in the second quarter of 2023 and higher than the first quarter of 2024 which stood at 23.01% and 21.07% respectively.
Stakeholders have expressed concern that Nigeria’s agricultural sector has been on a continued decline in the past seven years – since 2017. This is not good news for the consumer goods firms who depend on the sector for local sourcing of their raw materials under the backward integration scheme.
According to data by NBS, aside from the second quarter (Q2) of 2016 when agriculture achieved a real gross domestic product (GDP) growth rate of 4.5 percent year-on-year, the sector has maintained an uninterrupted slide in the past seven years. The facts speak:
In Q2 2017, agriculture declined to a growth rate of 3.01 percent (from 4.5 percent in the corresponding period of the previous year), before it hit 1.19 percent in Q2 2018. The fortune of this strategic sector, which is the largest employer of labour, rose marginally to 1.79 percent in Q2 2019, then plunged to 1.58 percent in Q2 2020.
Although the overall GDP growth rate rose to 3.40 percent in Q2 2021 from -1.92 percent in the previous year’s equivalent period, the positive trend did not impact on agriculture: The sector, instead, nosedived to a 1.3 percent growth rate in Q2 of that year. It then sank deeper to 1.2 percent in Q2 2022, before recording a stunted growth of 1.50 percent in Q2 2023.
In all, while the overall contribution of agriculture to GDP hovered on the average of 23 percent during the seven-year period, the receding fortune of this sector was a major concern to the consumer goods firms. This is because the consumer goods firms rely significantly on agriculture to source their local raw materials under the backward integration policy.
The manufacturing sector is equally on life support. Real GDP growth in that sector in the second quarter of 2024 was 1.28% (year-on-year), lower than the same quarter of 2023 and lower than the preceding quarter by 0.92% points and 0.22% points respectively. The growth rate of the sector on a quarter-on-quarter basis stood at -15.16%.
The Real contribution to GDP in the 2024 second quarter was 8.46%, lower than the 8.62% recorded in the second quarter of 2023 and lower than the 9.98% recorded in the first quarter of 2024.
The umbrella body of major manufacturers in Nigeria, the Manufacturers Association of Nigeria (MAN) had declared that 767 manufacturing companies shut down while 335 others became distressed in 2023 as CBN’s tight monetary policy bites harder.
The manufacturers lamented that the continuous adoption of tight monetary policy was worsening the already bad situation of the real sector, and called for a robust synergy between the monetary and fiscal authorities.
Segun Ajayi-Kadir, Director General of MAN, said: “In broad terms, the implications of maintaining the same pattern of monetary policy decisions in the last two years is evident in the continuous macroeconomic instability prevalent in the economy with overwhelming impact on the manufacturing sector in Nigeria.
For example, findings from 10 sampled major manufacturing firms, mainly in the consumer goods group, showed they reported a total of N517.1 billion in non-recovery, net foreign exchange losses in the first half of the year (H1 2023), occasioned by the devaluation of the naira.
Specifically, Nestle Nigeria Plc and Dangote Cement Plc were the worst hit with non-recovery net forex losses of N123.7 billion and N113.6 billion respectively. They are followed by Nigerian Breweries Plc N85.26 billion, Dangote Sugar Refinery Plc N83.09 billion and Guinness Nigeria Plc N41.9 billion.
Others are International Breweries Plc with N40.66 billion, Neimeth Pharmaceuticals Plc N22.82 billion, Unilever Plc N2.93 billion and Cadbury Nigeria Plc N1.03 billion.
The eroding wave of depreciation resulted in total post-tax loss of N370.57 billion by the 10 firms, compared to N175.9 post-tax profit they posted in the equivalent period of the preceding year. The development impacted severely on the balance sheets of Nigerian businesses as they had to source extra funds in local currency to meet their dollar-denominated obligations.
