Contradictions in Nigeria’s Jobless GDP Growth
October 10 (THEWILL) – Nigeria’s GDP growth does not indicate an increase in production that could spill over into job creation. Positive growth in gross domestic product (GDP) normally indicates that producers in the economy are hiring new staff for the increase in output generated. This is not the case in Nigeria where an impressive 5% output growth in the second quarter of 2021 comes down to jobless growth.
The National Bureau of Statistics reports that economic activities have moved closer to levels they were before the Covid-19-induced lockdown in 2020. There has been a substantial return to business activity in the country, but improvements have occurred without returning to pre-crisis employment levels. Economic growth here is driven by a few service sectors and industries with low employment rates. And production growth has been achieved in an environment in which reducing jobs and personnel costs is a driving strategy in the industrial and service sectors of the economy.
If there had been balanced growth in the labor-intensive industrial and agricultural sectors, such high GDP growth should rightly have a reasonable impact on the economy in key dimensions including creation. jobs is number one. Other expectations include a substantial improvement in the purchasing power of consumers, a positive effect of supply on inflation and poverty reduction. On the contrary, the economy grew while these economic and social indicators continued to deteriorate.
The explanation lies in the uneven growth between sectors and industries and, more fundamentally, in the structural flaws where a few large industries dominate the economy. But industries, large and small, are doing essentially the same thing: downsizing to increase production. A number of them are not even regular paying workers. At five percent growth in output, Nigeria posts the highest quarterly growth figures since record GDP growth of 5.9 percent in the fourth quarter of 2014. It marks three consecutive quarters of positive growth in the economy. con 6.1 percent and 3.6 percentpulls that the economy recorded in the second and third quarters of 2020, respectively. The growth rate exceeded analysts’ forecast of 3.6 percent for the second quarter. The problem, however, is that the growth-promoting sectors are mainly service activities with little capacity for job creation.
Real GDP growth in the second quarter is driven by road transport which increased 92.4% year-on-year, compared to a contraction of 51.4% during the same period in 2020 and a decline of 23.7% . in the first quarter of 2021. Next come the supply of electricity, gas, steam and air conditioning, which increased by 78.2%, compared to a decrease of 3% during the same period in 2020.
Rail transportation and pipelines grew 53.3 percent in the second quarter, a further increase from a 63.3 percent decline in the second quarter of last year. Wholesale and retail trade grew 22.5%, compared to a contraction of 16.6% over the same period in 2020. Other growth-enhancing service-based sectors include water utilities , sanitation and waste management, which increased by 18.5%; insurance – which grew 15.7%; and telecommunications and information services, which improved 5.9% in the second quarter.
While the service sectors led the growth of the GDP, the sectors and industries that created jobs remained in the territories with negative or weak growth of the economy. The mining and quarrying sector, dominated by crude oil and natural gas, fell 12.3% in the second quarter of 2021. The contraction is driven by crude oil and natural gas production, which fell by 12.3%. 7% over the period. This is the fifth consecutive quarter of production contraction in the sector since the second quarter of last year.
The sector’s contribution to real GDP fell from 9.1% recorded in the same quarter in 2020, to 7.6% this year. Average daily oil production is down from previous highs to the lowest levels in years in the 1.6 mbpd region, where it has hovered since the third quarter of 2020. The oil sector’s contribution to GDP is therefore increased from 8.9% in the second quarter. from last year, to 7.4 percent in the second quarter of 2021. The labor-intensive agricultural sector ended the second quarter with dismal growth of 1.3 percent year-on-year.
This is one of the industry’s worst growth records since 2016, measuring well below a five-year average real growth rate of 2.1%. This is a reflection of the damaging impact of safety issues on agricultural activities across the country. The most affected agricultural activity is livestock, which plunged from growth of 2.3 percent in the second quarter of last year to 0.1 percent in the second quarter of this year.
The poor performance of agriculture indicates a significant loss of ground in the sector’s role in providing employment to a large part of the population and in providing food for citizens. The sector’s contribution to overall real GDP increased from 24.7% over the same period in 2020 to 23.9%. The trend is interpreted to mean that runaway food inflation is unlikely to slow down anytime soon.
The apparently impressive five percent GDP growth is seen as meaningless in the face of growing food shortages and intensifying hunger. The inability of agricultural activities to contribute significantly to the overall growth of real GDP is highlighted as the critical factor that underpins the growth of the economy without generating jobs. Oil refining operations remain a calm front, with some of the highest contraction records held in the past five consecutive quarters. He contowed 46.8 percent in the second quarter. It is even the lowest rate of contraction recorded in petroleum refining since the second quarter of last year. As with agriculture, there is a strong apprehension that petroleum refining – a major industry with a high capacity to directly and indirectly stimulate employment in the economy – may not be part of GDP growth until now this year. This has never been the case for the three consecutive quarters of positive GDP growth. Industrial activities, comprising the job-creating activities of construction, mining and quarrying, manufacturing and others, contracted by 1.2% in the second quarter of 2021. With the exception of a slight positive growth in first quarter, the industry group has been in decline since the second quarter of 2020.
• Uzor is an economist and financial analyst