The significance of the second quarter GDP numbers

…whichever your preferred cause, “generally slower pace of economic activities at the start of the year”, or “seasonality”, the significance of the NBS’ latest report is to point out that the Nigerian economy is only toddling after a very traumatic year.

“How could the economy have grown by 5.2% year-on-year in the second quarter of this year?”, appeared to have been the incredulous, albeit standard, response to the release by the National Bureau of Statistics (NBS), last week, of output data on the economy for the March-June quarter. The question had nothing to do with any tension between the rate at which the economy has been chugging along over the last decade, and its potential output level ― difficult, though the latter is to measure. Along so many important economic indices ― output growth rate, tax take, etc. ― an economy our size still runs way below its potential. The result of a failure to attract and effectively deploy capital and to invest in its people.

Instead, the doubt over the economy’s gross domestic product (GDP) growth rate for the second quarter of this year reflects how uncomfortable anecdotal evidence of the economy’s performance have become over the last two years. Remember that the economy was in a very bad place long before the pandemic struck last year, and governments at the different tiers have been struggling for some time now to contain its more harmful effect, especially through the Central Bank of Nigeria’s (CBN) embrace of unorthodox monetary policies. These, notwithstanding, by early last year, most Nigerians knew of a family whose circumstances had worsened so much that they no longer could pay school fees for children who were then out of school.

Printers appeared to have been particularly worse off ― victims of the transition from the use of paper in offices to digital communications channels. The pandemic worsened the plight of this new precariat, as it did the outcomes for businesses (and their employees) in the contact-intensive sectors of the economy. In the latter sectors, severe downturns in the hospitality and airline industries hugged the limelight. But “bukas” and speakeasies suffered just as well, as much of the custom traditionally generated by staff commuting to and from office locations atrophied. Artisans (plumbers, barbers, hairdressers, make-up artists, the entire Lagos party industry) ― the informal sector, all took a beating.

The oil and gas sector’s middling performance was no surprise, given the low production quotas agreed by members of the Organisation of the Petroleum Exporting Countries (OPEC) and its non-member collaborators to keep oil prices supported.

Responding to these challenges, businesses that once catered exclusively for parties and large social functions pivoted towards the delivery of prepared meals to their clients at home ― a trend which mirrored the increasing tendency of some white-collar workers to work away from the office. But as with the movement online by some of the highbrow eateries, this was an economically marginal response. The dominant trend in the last one year has been the collapse of many a small- and medium-scale outfits. And many workers in these sectors continue to tread water.

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So, where did the NBS’ growth figures come from?

The non-oil sector seemed to have done much of the grunt work. The oil and gas sector’s middling performance was no surprise, given the low production quotas agreed by members of the Organisation of the Petroleum Exporting Countries (OPEC) and its non-member collaborators to keep oil prices supported. However, it would appear that the 12 per cent by which the sector shrank on an annual basis in the second quarter of this year, owed as much to the country not meeting its assigned OPEC production numbers. The sector had shrunk by 6.6 per cent in the same quarter in 2020.

In contrast, propelled by strong performance in the wholesale and retail sub-sector, which (after eight back-to-back quarters of contraction through the first three months of this year) rose by 22 per cent year-on-year in the second quarter, the non-oil sector grew by 6.7 per cent on an annual basis in the second quarter, from a shrinkage of 6.1 per cent in the same quarter of last year. Electricity, transportation, and construction were the other sub-sectors that put in a decent shift in the second quarter.

In its current report, according to the NBS, “quarter on quarter, real GDP grew at -0.79% in Q2 2021 compared to Q1 2021, reflecting slightly slower economic activity than the preceding quarter due largely to seasonality”.

Impressive, though, some of these numbers are, some additional context is useful. 2020 was a lousy year for the Nigerian economy ― it was for most economies. A large part of the problem was the upshot of efforts by governments all over the world to contain the spread of the coronavirus pandemic. Vaccination against SARS-CoV-2, the virus that causes the disease, may not be near levels needed to confer herd immunity globally, but it has allowed economic activity to resume nearly everywhere.

From zero, any uptick in activity was always going to be noisy when interpreted from a year-on-year vantage. This is why the quarter-on-quarter growth numbers matter. In the first quarter of this year, the NBS reports that real GDP grew quarter-on-quarter at -13.93 per cent, compared to Q4 2020, reflecting a “generally slower pace of economic activities at the start of the year”. In its current report, according to the NBS, “quarter on quarter, real GDP grew at -0.79% in Q2 2021 compared to Q1 2021, reflecting slightly slower economic activity than the preceding quarter due largely to seasonality”.

In other words, whichever your preferred cause, “generally slower pace of economic activities at the start of the year”, or “seasonality”, the significance of the NBS’ latest report on the GDP is to point out that the Nigerian economy is only toddling after a very traumatic year.

Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.