G rowth in the non-oil sector performed dismally by –0.40% points at (1.64%) in Q2 2019 offsetting the growth of 5.15% in the oil sector to put the overall growth on a downward dive weaker than the forecast growth of 2.3% by the African Development Bank.
In September 2018, the Monetary Policy Committee had expressed fear of the economy slipping back into recession following growth of 1.95 and 1.5 in the first and second quarter of 2018 respectively. It was a strong sign of weakness of the economy impacted by the poor performance of crude oil. They further attributed the weakness to late implementation of the 2018 budget, weakening demand and consumer spending due to low minimum wage and rising contractor debts. Other negative factors were persistent flooding and insecurity which continued to throw knocks at agricultural activities.
More signs of weakening economy are continuing to manifest such as the depletion of the nation’s foreign reserve which according to recent report went down to USD43.67bn. This is a significant sign that the economy is under performing. If this downward performance continue in the remaining 2 quarters, Nigeria could be heading back to recession.
The same factors outlined by the MPC are still being much observed and attributed to the reduced growth in the Q2 2019. Added to the above is the issue of clear policy direction. For instance, CBN at the last MPC seating, reduced interest rate and as mentioned on the analysis of the interest rate cut, the MRR remained unmoved meaning that though interest rate is cut to encourage borrowing by the real sector, ratio of fund for commercial lending remain the same.
Now, the third quarter of 2019 is running on its third month and the fourth quarter knocking. what are the concerted actions to be taken by the government to stimulate growth in the economy as against those that are likely to impact the economy negatively?
The recent partial closure of the border by implication is expected to weigh on the services sector of the economy as the action may affect other economic activities that are aided by trade through the border. Furthermore, comparing the ratio of rice producers and consumers, the closure will have significant impact on the consumers’ spending on other goods since consumers now spend more on the food item. In this light, the government need to urgently work out a palliative to cushion the effect. One of such is the implementation of minimum wage which is yet to take effect and consumer’s spending still remain weak. It is expected that government work to quickly implement the new wage.
Concurring with other economic observers and analysts, much should not be expected from the third quarter and maybe for the fourth quarter as well though there may be slight improvement. This is for the fact that the same factors that impacted on the slow growth in Q2 are still being experienced.
Starting from the agricultural sector, flooding still disturbed major food growing areas of the nation such as Benue and its neighboring States. Kidnapping and other criminality still cast fear on farmers especially in the northern part of the country.
Major infrastructure are still in deficit. Movement of raw farm produce, other raw material and finished goods still weigh heavily on cost due to inefficient transport system. Unstable electricity supply still have its disruptive impact and heavy overhead on the manufacturing sector.
However and as said, there may be improvement in the 3rd and 4th and this can only happen if implementation of the 2019 budget is rigorously pursued and the minimum wage policy is quickly implemented. The two will release funds into the economy and stimulate private sector spending
