The trade sector which comprises of whole and retail trade contracted by 0.25 percent in the second quarter (q) of 2019, after recording three positive growth rates since Q3 2018, a BusinessDay analysis shows.
From the analysis of the recently released National Bureau of Statistics (NBS) GDP report, the trade sector recorded a negative growth of -0.25 percent from recording positive growth of 0.85 percent, 1.02 percent and 0.98 percent in Q1 2019, Q4 2018 and Q3 2018 respectively.
“Growth in the trade sector has remained on a downtrend over the past 3 quarters after rebounding from a recession. However, looking at Q2 numbers, trade declined to – 0.25 percent can be attributed to the trade policies particularly regarding tariffs which have not been favourable. A key one is the adjustment of excise exchange rate from N305 to N326,” Ayorinde Akinloye, a consumer analyst at CSL Stockbrokers said.
“And furthermore, domestic consumption still remains weak. Consumer income has virtually being stagnant in nominal terms while inflation remains in double digit territory. Thus once demand remains poor, trade would definitely weak,” Akinloye further said.
Ayo Akinwunmi at FSDH Merchant Bank said that people still don’t have money to spend and that the trade sector is very important to the economy. “The trade sector corresponds to the manufacturing sector. What you are producing is not really being traded,” Akinwunmi said.
From the report, the manufacturing sector recorded a negative growth of -0.18 percent in Q2 2019 for the first time since q4 2017. Food, Beverage and Tobacco under Manufacturing sector fell marginally 0.54 percentage points to 1.22 percent in Q2 2019 from 1.76 percent in Q1 2019.
Johnson Chukwu, CEO, Cowry Asset Management Limited said, “Consumer spending and disposal income is still low. People are only spending money on necessities. There is minimal discretionary spending going on in the country and this will continue to happen in the third quarter.”
Also from the report, in the second quarter of 2019, the nominal year on year growth rate of the trade sector stood at 3.03 percent. This indicates an increase of 3.04 percent points when compared to the growth rate of –0.01 percent in the second quarter of 2018, but –1.79 percent points lower than the preceding quarter growth rate of 4.82 percent.
The quarter on quarter growth rate was 0.50 percent. Trade’s contribution to Nominal GDP in the second quarter of 2019 was 15.36 percent, lower than the contribution in the same quarter of the previous year, and the contribution in the preceding quarter.
In real terms, the trade sector’s year on year growth stood at –0.25 percent, or 1.89 percent points higher than the rate recorded one year earlier at –2.14 percent, but –1.10 percent points lower than in the preceding quarter at 0.85 percent.
Quarter on quarter growth stood at –1.77 percent. In real terms, Trade’s contribution to GDP was 16.10 percent, lower than the 16.45 percent it represented in the previous year, and 16.86 percent recorded in 2019 first quarter.
Data from the National Bureau of Statistics on Gross Domestic Product (GDP) by Income and Expenditure approach at 2010 purchaser’s values show that consumption expenditure of households has been declining at varying pace since it rose by 1.5 per cent in 2015.
Also, the country’s per capital income declined to 2,049 in 2018 from 3268 in 2014, according to the International Monetary Fund (IMF).
A recent study on the consumption pattern of Nigerian households which tells an old story of deep-seated poverty and living on the tethers of squalor suggests the country’s “large domestic market” is big for nothing.
Despite grappling with growth, Nigeria boasts of Africa’s biggest economy with a population of 200 million which has been projected to overtake United States, the world’s third most populous country, by 2050, but the low discretionary income of Nigerians, according to SBM Intel, contradicts talk of a big local market.
SBM Intel, a leading geopolitical intelligence platform in Nigeria, says the country’s true market size is “really the number of people who are able to spend discretionarily once they get past spending on the essential commodities,” and that number, SBM Intel estimates, is under 37 percent of the population.
BUNMI BAILEY
