Nigeria’s economy barely trudged along in 2019, with data likely to confirm another lacklustre year for Africa’s most populous nation.
Chances are that the economy, tipped to grow 2.1 percent by year-end, expanded below population growth for the fourth straight year while foreign direct investment slumped to a six-year low of $848 million.
According to ten economists polled in a Business Day survey, unemployment rate also probably soared by the end of the year as a rapidly growing labour force expanded faster than the rate of job creation.
According to the World Bank’s latest economic report, over five million Nigerians entered the labour market in 2018, with 4.9 million joining a growing army of unemployed people compared to the preceding the year.
The last unemployment report by government-funded data agency, National Bureau of Statistics (NBS), showed 23 percent of the labour force was unemployed while 43 percent were either unemployed or underemployed in the third quarter of 2018, a 22 percent increase compared to the comparable period of 2017.
As at Q3 2018, 21 million Nigerians were unemployed and 39 million either unemployed or underemployed. If unemployed and underemployed Nigerians formed a country, it would be as populous as Canada and two times the population of the Netherlands.
More Nigerians were probably rendered jobless in 2019, with unemployment rate likely to have topped 30 percent, going by the trend over the past two years.
That will set a record for the highest unemployment rate in over a decade and pushes the country’s misery index to a new high.
The misery index is an informal measure of the state of an economy generated by adding together its rate of inflation and its rate of unemployment.
Inflation rate will probably average 12 percent by the end of the year which is hardly an improvement from the 12.1 percent average last year. Going by this, the misery index could be 42 percent at the end of 2019.
Nigerians are the biggest losers of an underperforming economy that is not able to create opportunities for them and has seen them grow progressively poorer since 2016, as evidenced by declining per capita GDP.
“Nigerians have been getting poorer because we have had an uncompetitive and largely unproductive economy [with] poor infrastructure, poor human capital and education and poor welfare,” said Amaka Anku, Africa head for the Eurasia Group consultancy.
“It would be great to see longstanding [infrastructure] projects completed, such as the [Lagos — Kano] railway that has been in the works since the early 2000s,” Anku added.
In what is hardly new counsel, Nigeria must seek more investment as a way to get back to strong growth, even though it is unclear where that will come from.
A surge in oil revenue-driven investment is unlikely. Other investments, besides short-term portfolio flows, continue to be hampered by the difficult operating environment and uncertainties in the foreign exchange market.
However, to break out of this trap, Nigeria will need to show it is a serious investment destination, for example by enacting legislative-driven reforms to attract capital to infrastructure.
For another indication that the economy stuttered through 2019, look no further from the stock market.
The stock market could close the year with a loss of 14 percent, a streak that has now lasted two years on the bounce. In 2018, the market dipped 17.8 percent as political uncertainty and a lack of market reforms saw foreign investors pull back. That effectively suggests Nigerian stocks have shed about 30 percent of their value on average in the last two years.
An investor who staked N10 million in stocks in 2018 would have lost N3 million if he chooses to sell today.
That market risk is a big dampener on investor appetite and has contributed to the lull in the market in 2019 with local and foreign investors preferring a safe bet in government bonds.
The 42 percent stock market return in 2017, which ranked Nigeria among the top three best performing stock markets in the world, now look a distant memory, with the government failing to build on that momentum to catalyse further growth.
The stock market has largely reflected the state of the economy, with outlook constrained by a weak macroeconomic policy environment.
“We see little scope for the economy to expand above 2.3% in Q4-2019,” said Omotola Abimbola, an investment researcher at Chapel Hill Denham.
Abimbola implied that there were headwinds ahead for economic growth, with the oil and non-oil sectors faced with separate challenges.
“The increased focus of OPEC on compliance with the oil production cut agreement by members led to a decline in Nigeria’s oil production (excluding condensates) by 2.0% mom in October to 1.81mb/d. Against this backdrop, we expect the oil sector to slow to 6.22% yoy from 6.44% yoy in Q3-2019,” Abimbola said.
“We expect the non-oil sector to benefit from expansion in domestic credit, although the border closure remains a drag on trade while the telecoms sector will likely slow to single digit due to high base effect. “Nonetheless, we expect non-oil sector growth to accelerate to 1.95% yoy, driven by further recovery in agriculture,” Abimbola added.
LOLADE AKINMURELE
