March 02, (THEWILL) – The Federal Government is celebrating the country’s recent Gross Domestic Product (GDP) report published by the National Bureau of Statistics (NBS), which showed a 3.84 percent growth in real terms in the fourth quarter (Q4) of 2024.
The performance reflects an improvement from the 3.46 percent growth recorded in the same period of 2023. It also marks a slight increase from the previous quarter which recorded a 3.46 percent growth rate.
For the full year 2024, Nigeria’s economy grew by 3.40 percent, an improvement from the 2.74 percent recorded in 2023, also being applauded by the authorities as a positive mark of economic development. The NBS attributes the GDP expansion to stronger performance in the services sector, which recorded a 5.37 percent growth rate and accounted for 57.38 percent of the country’s total GDP.
The worrying trend
Despite the overall economic growth, the agriculture sector, which remains critical for food security and employment, recorded a slower expansion of 1.76 percent, down from 2.10 percent in the corresponding quarter of 2023. Crop production remained dominant, accounting for 90.70 percent of the sector’s contribution to GDP.
In terms of GDP contribution, agriculture contributed 25.59 percent to Nigeria’s GDP in real terms, constituting a decrease from 26.11 percent in the same period in 2023. This reflected the declining trajectory recorded in the Q3 2024 when agriculture’s contribution to real GDP dropped to 28.65 percent from 29.31 percent in the same quarter of 2022.
The manufacturing sector, which also plays a critical role in terms of employment, recorded a real GDP growth rate of 1.79 percent in Q4 2024, up from 1.38 percent in the previous quarter. This was mainly on account of improved performance at Eleme Petrochemical and revival of the petroleum refineries.
However, manufacturing’s share of GDP fell to 8.07 percent, from 8.23 percent in the corresponding quarter of 2023.
The sector’s contribution to the GDP in Q3 2024 declined to 8.21 percent from 8.42 percent in the corresponding period of 2023. The sector in Q3 2024 contributed 8.59 percent and 8.42 percent to the GDP in Q3 2022 and Q3 2021 respectively.
Analysts at FBNQuest Capital Research had said in a note that the sector’s progress was constrained by multiple macro-headwinds, including the adverse impact of high inflation on household wallets and operating costs, high-interest environment, and naira volatility.
“The sector posted another sluggish growth,” the Analysts said, noting that several multinational companies have exited the Nigerian market due to the tough business environment.”
Inflationary impact
Nigeria’s inflationary outlook has undergone a significant shift, following the recent rebasing of the CPI by the NBS. The latest data for January 2025 shows headline inflation reactions at 24.48%, a sharp 10.32 basis points decline from December 2024’s 34.80%.
The NBS maintains that the surge in food inflation continues to challenge the economy, with firms shutting down over high operation costs while households experience steep drop in living standard spiked by high cost of living.
The NBS also explained that worsening insecurity across the country, especially in the North which is the nation’s food basket, is behind the high cost of food. It noted that the mass food producing areas of the North have been under the siege of insecurity in the past nine years.
In states like Niger, Benue, Plateau, Borno, Katsina, Taraba and others, the farming communities have deserted their farm lands where they were displaced by bandits, herdsmen, terrorists and kidnappers; and are now living in the internally displaced persons (IDP) camps.
Unfortunately, there are no signs that the ugly trend is likely to improve in 2025, given the continued spate of killings and abductions in the North since the beginning of the Bola Tinubu-led government in May 2023, and since the year as has been the case in Benue.
The Central Bank of Nigeria (CBN) last week maintained its benchmark interest rate of 27.50 percent as manufacturers struggle with the high interest rate amid rising production costs.
Muda Yusuf, chief executive officer, of the Centre for the Promotion of Private Enterprise (CPPE) said it is troubling that despite the declining growth performance of many critical sectors of the economy as earlier evidenced in the third quarter GDP report, the Monetary Policy Committee (MPC) continued its tightening stance
Productivity-gap concern
Nigeria’s jobless GDP growth, which hinges on the poor performance of the real sector, constitutes a major concern to industry and economy watchers as it is subsumed in the growth euphoria among government officials.
Industry experts observe that the Q4 2024 GDP growth numbers which are suboptimal for a 200 million population growing at 3 percent as GDP per capita, had fallen to an all-time low, with an economy struggling with stagflation.
“This highlights ‘The Output Gap’ problem in the Nigerian economy where we are falling short of our productivity and growth potential,” said Adetilewa Adebajo, CEO, The CFG Advisory, in a note last week.
According to Adebajo, the Nigerian government needs to revamp its trade policy and effect the Harmonised System (HS) Codes realignment of the industrial policy, in order to address the declining productivity in manufacturing, industry and agriculture in an effort to boost growth, stressing that investment policy incentives also need to be amplified.
He said, “Excessive fiscal spending with a N150 trillion debt burden, 2 years cumulative 40 trillion naira deficit is a source of concern.
“N16 trillion for debt service in the 2025 budget exceeds the defense, education, health and infrastructure budgets combined at N14 trillion. While the sovereign risk spreads have fallen to a 5-year low on our sovereign bonds, our credit rating remains at junk bond status.”
Way out
Industry experts emphasise that the Government has to optimize equity in its capital structure by selling assets in an effort to reduce its debt profile and achieve investment grade credit ratings.
Adebajo noted that the direction of government should be to enact policies that will enhance productivity, create employment, close the output gap and grow the economy.
While relative stability has been achieved in the economy, to build on this requires deliberate industrial policies to achieve import substitution in targeted sectors of the economy; building on the success with cement, fertilizer and petroleum refining, should be replicated.
“Deliberate policies therefore must be put in place to develop the local supply chain with Nigeria farmers, in an effort to boost local sugar cane production, increase agricultural productivity and create employment along that value chain. Closing the output gap is the only way to achieve the desired trillion-dollar economy,” the industry expert noted.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
