Abdulwahab Isa 
Groaning under double digit inflation, contracting GDP and rising unemployment, Nigeria’s economy is facing testy challenging times worsened by outbreak of COVID -19, Abdulwahab Isa reports
Consumer Price Index (inflation report), employment data and Gross Domestic Product (GDP), which measures quantum of activities of a nation over a period, are parts of the parameters for measuring the health status of an economy. In the past 10 days, Nigeria’s foremost data custodian, National Bureau of Statistics (NBS), had released these three data as the economy wades through turbulent 2020. Regrettably, the figures are nauseating and largely uninspiring. Each of the data raised red flag, signposting an economy passing through difficult moment. The three key reports – employments’ figure, the Consumer Price Index (CPI) and, lately, the Gross Domestic Product (GDP) for second quarter 2020 revealed an economy that is gasping for breath amid coronavirus pandemic.
21.7 million idle hands Q2’20
A healthy and prosperous nation has fewer hands of idle hands to contend with. In the past two decades, Nigeria’s unemployed population has been on steady rise. Experts linked high level of criminality such as kidnapping, banditry; armed robberies etc to upsurge in the number of idle hands. NBS in its latest figure on Nigeria’s unemployment rate for second quarter 2020 put unemployment figure at 27.1 per cent, meaning that 21.7 million Nigerians remain unemployed. According to NBS, “Nigeria’s unemployment rate as at the second quarter of 2020 is 27.1 per cent, indicating that about 21.7 million Nigerians remain unemployed. For the period under review, the unemployment rate among young people (15-34years) was 34.9 per cent, up from 29.7 per cent, while the rate of underemployment for the same age group rose to 28.2 per cent from 25.7 per cent in Q3, 2018. These rates were the highest when compared to other age groupings. The agency went a step further to disaggregate unemployment and underemployment state by state. During the period under review for instance, it said Imo State recorded the highest rate of unemployment with 48.7 per cent. This was followed by Akwa Ibom with 45.2 per cent and Rivers State with 43.7 per cent. States with the lowest rate of underemployment include Anambra, Kwara and Sokoto with 13.1 per cent, 13.8 per cent and 13.9 per cent respectively. In the case of underemployment, Bauchi State recorded the highest rate with 43 per cent, followed by Yobe and Adamawa, both with 38.4 per cent. Interestingly, there is a nexus between poverty, joblessness which ultimately reflects prosperity of a nation.
Spiralling double-digit inflation
The Consumer Price Index (CPI) for measuring monthly inflation maintains consistent upswing trajectory in the past one year, a development analyst said portend grave danger to the economy. In the recently released inflation report for July, the figure stood at 12.82 per cent against June figure of 12.56 per cent. The latest figure represents 0.26 per cent points higher than the rate recorded in June 2020 (12.56%). NBS noted that the rise in the food index was caused by increases in prices of bread, cereals, potatoes and yam. Increase in prices was also recorded by tubers, meat, fruits, oils and fats, and fish. Cost of living remains extremely high in Nigeria, a country with over 27 million jobless citizens. Experts on economy described continuous rise in inflation as both worrisome and dangerous to the economy. Prof. Ayo Olowe of the Department of Finance, University of Lagos, described rising inflation as cost-pushed occasioned by naira devaluation which affected cost of production. Olowe said that the Central Bank of Nigeria (CBN) needed to stabilise exchange rate at the parallel market and Bureau De Change by ensuring foreign exchange availability. He also called for introduction of various regulatory measures to check sharp practices including hoarding and diversion of foreign exchange. Olowe added that the government should aggressively pursue diversification of the productive sectors into local contents for inputs. According to him, the government should enhance investment in the agriculture sector, mining and extractive industries. Olowe said that entrepreneurs using local contents should be encouraged to reduce importation. Sheriffdeen Tella, a Professor of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun, noted that there had been fall in outputs due to COVID-19 lockdown. “There is a huge gap between demand and supply which necessarily causes inflation. “The exchange rate has depreciated badly resulting in high cost of production and consequent rise in prices. However, the major items that pushed up the prices are related to foods and local products, implying that the major problem has to do with output shortage,” Tella said. Professor Uche Uwaleke, a former Head, Banking and Finance department, Nassarawa State University, called for a sync between monetary and fiscal authorities to combat current spike in inflation.
Contracting GDP
The NBS released GDP for the second quarter 2020 growth on Monday. Key sectors experienced contractions largely due to severe impacts of COVID -19 on the economy. In the report, the figure contracted by –6.10 per cent (year-on-year) in real terms in the second quarter of 2020, ending the three-year trend of low but positive real growth rates recorded since the 2016/17 recession. The decline was attributed to significantly lower levels of both domestic and international economic activity during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19. The domestic efforts ranged from initial restrictions of human and vehicular movement implemented in only a few states to a nationwide curfew, ban on domestic and international travel, closure of schools and markets among others, affecting both local and international trade. When compared with Q2’19, which recorded a growth of 2.12 per cent, the Q2’20 growth rate indicated a drop of 8.22 per cent points, and a fall of 7.97 per cent points when compared to the first quarter of 2020 (1.87%). Consequently, for the first half of 2020, real GDP declined by 2.18 per cent year on year, compared with 2.11 per cent recorded in the first half of 2019. Quarter on quarter, real GDP declined by 5.04 per cent. Only 13 activities recorded positive real growth compared to 30 in the preceding quarter. In second quarter under review, aggregate GDP stood at N34.02 trillion in nominal terms, or -2.8 per cent lower than the second quarter of 2019 which recorded an aggregate of N35.001 trillion. Overall, the nominal growth rate was –16.81 per cent lower than what was recorded in the second quarter of 2019, and –14.81 per cent points lower than what was recorded in the first quarter of 2020.
On his part, the Director-General, LCCI, Dr Muda Yusuf, noted with concern the decline in national output. He said the 6.1 per cent contraction was not a surprise as the number reflected the profound impact of the COVID-19 on the economy. Yusuf said: “The Nigerian economy is currently in dire straits. “Apart from the urgent need for policymakers to reflate the economy, it is critically important for policymakers to also tackle the twin challenge of rising inflation and unemployment rates. “With inflation and unemployment at record high of 12.82 per cent and 27.1 per cent respectively.” Yusuf said: “It is imperative to ensure effective synchronisation of fiscal and monetary policies and proper implementation of the sustainability plan among other measures. “The structural bottlenecks to productivity in the economy needs to be urgently removed through a mix of fiscal, monetary and regulatory measures.” He said it was imperative to reduce policy uncertainties in order to inspire the confidence of investors, both domestic and foreign. Reacting to the latest GDP report, analysts said it was not surprising. According to Uwaleke, “the negative growth in real GDP in Q2’20 was expected. This appears to be in line with global expectations as we have seen similar trends recently in countries like UK and Japan. “I am also not surprised about the huge size of the contraction put at 6.10%. As a matter of fact, because it is based on year-on-year, when one considers the 2.12% positive real GDP growth this same period last year, the decline in GDP comes to as high as 8.22 per cent. “It is easy to see why this happened. The negative impact of COVID’ 19 on health, which resulted in lockdowns and supply chain disruptions, the collapse in crude oil price and reduction in output in compliance with OPEC + agreement, the illiquidity in the forex market and the lingering insecurity in the country which affected agriculture output are to blame. “This explains why the agriculture sector managed to eke out a growth rate of 1.58 per cent, and manufacturing, trade and so many other sectors recorded negative growth. The lockdown and movement restrictions really affected the accommodation and food services sector which declined by as much as 40 per cent. “I think this is going to be the worst this year. A negative real GDP growth is also most likely to be recorded in Q3’20 but the size will be smaller as the economy gets restarted and crude oil price gradually picks up. “To ensure the impact of these economic headwinds are moderated, it is important to increase the size of the various interventions by the government and the CBN and ensure they are well targeted and implemented.”
Last line
For an economy enduring a double-digit figure inflation, contracting GDP and rising unemployment, Nigeria is facing her greatest challenges ever in 21st Century, hastened exceptionally by the outbreak of coronavirus pandemic.
