Weak consumer spending may be the major factor contributing to the three year negative growth recorded in the trade sector, according to analysts.
According to the newly released 2018 National Bureau of Statistics (NBS) GDP report, growth in the trade sector recorded a three year growth to -0.63 percent in 2018 from -0.24 in 2016.
Gbolahan Ologunro, an equity research analyst at Lagos-based CSL Stockbrokers said, “This shows that consumer spending is weak .The growth in the real sectors of the economy has been below historical tread levels. And what you will find out is that those sectors that should be the real engine of the economy have not been able to increase the level of employment opportunities so that has also affected consumer spending.”
“For instance the real estate sector has been experiencing negative growth for about 12 consecutive quarters now and the agricultural sector grew at 2 percent in 2018. These sectors have been experiencing growth challenges,” Ologunro concluded.
Consumer spending which is driven by growth in these sectors is not strong enough to give rise to higher employment opportunities that will give rise to consumption.
Nigeria’s unemployment rate increased from 18.8 per cent in the third quarter of 2017 to 23.1 per cent in in the third quarter of 2018, according to NBS.
Johnson Chukwu, CEO, Cowry Asset Management Limited attributed the three years negative growth to the low purchasing power of consumers in the economy, lack of increment in the wages and salaries of workers and the bottlenecks in the importation of goods and services.
“Over the past three years the value of currency has been displaced by more than 50 percent and there have not been any increment increase in the wages and salaries of workers,”
“Low purchasing power from consumers has impacted negatively on the trade sector and the bottlenecks in the importation processes has made it difficult for people to get foreign currency on time and this has constrained the volume of goods and services that comes in,” Chukwu concluded.
According to the International Monetary Fund (IMF) per capita income data, Nigeria’s income declined by 26 percent to $2050.2 in 2018 from $2763.2 in 2015.
Trade GDP growth rate stood at 1.02 percent, which is –1.05 percent points lower than the rate recorded one year prior, but 0.04 percent points higher than recorded in the preceding quarter.
Quarter on quarter growth stood at 9.93 percent. Though slightly better than 2017, growth rate of real trade GDP in 2018 remained negative at –0.63 percent.
Trade’s contribution to real GDP was 16.50 percent, lower than the 16.72 percent it contributed the previous year, but still higher than the 15.80 percent recorded in Q3 2018. The contribution of trade to real GDP in 2018 stood at 16.44 percent, a slight decline from 16.86 percent recorded for 2017.
BUNMI BAILEY
