March 13, 2012 / 8:03 AM / 7 years ago

Nigeria economy picks up on non-oil sector growth

ABUJA/LAGOS (Reuters) - Nigeria’s economy grew at a faster rate in the fourth quarter last year than the previous three months because of a stronger performance in the non-oil sector, particularly telecoms, data showed on Tuesday.

A man scrolls through his mobile phone in Nairobi May 12, 2009. REUTERS/Noor Khamis

Gross domestic product (GDP) in Africa’s second-largest economy rose to 7.68 percent in the fourth quarter 2011, compared with 7.40 percent in the third quarter, the national bureau of statistics (NBS) said in a report.

Africa’s largest oil exporter pumped an average of 2.4 million barrels per day in the last three months of the year, down from 2.6 million barrels per day a year earlier due to production outages.

But the non-oil sector grew 9.07 percent in the fourth quarter, higher than the 8.93 percent recorded in the same period in 2010.

“This growth was largely driven by improved activities in the telecommunications, building and construction, hotel and restaurant and business services,” the NBS said.

Nigeria’s economy grew 7.36 pct in the full year 2011, down from 7.98 pct in 2010, largely in line with expectations. The decline in growth reflects global economic sluggishness. Growth in Nigeria outperformed most developing economies.

Nigeria is reliant on oil exports for more than 95 percent of its foreign exchange revenues but only 15 percent of GDP. Agriculture is the largest contribution to GDP, making up about 40 percent of it.

Telecoms surged in Nigeria in the past decade after private companies were allowed to take advantage of the huge mobile phone market potential in the continent’s most populous country.

“This sector continued to perform impressively and has remained one of the major drivers of growth in the Nigerian economy, with its contribution to total GDP increasing continuously,” the NBS report said.

“The telecommunication sector recorded a real GDP growth of 36.31 percent in the fourth quarter of 2011,” it added, but did not give a comparative figure for the previous quarter.

Investors are optimistic about the consumer potential in Nigeria, but so far the telecoms surge has not been followed in other sectors.

BUDGET COMING UP

Nigeria plans to change the base year for its GDP this year from to 2008 from 1990, a move that could lead to a “huge jump” in the estimated size of the West African country’s economy.

When Ghana made a similar move to recalculate its GDP last November, its estimated output shot up by 60 percent, catapulting it into the ranks of the middle income countries.

Nigeria’s parliament is deliberating on an amended 2012 budget proposal put forward by Finance Minister Ngozi Okonjo-Iweala last month.

Okonjo-Iweala widened the fiscal deficit projection in this year’s spending plans to 2.97 percent last month, from the 2.77 percent in a previous budget plan presented last year due to lower revenue expectations.

The government was expecting to receive more funds after removing fuel subsidies on January 1, but it was forced to reinstate them partially after tens of thousands took to the streets in more than a week of protests.

And the National Assembly usually adds to the budget.

“This is a cause for concern at a time when the government is trying to at least freeze recurrent expenditure and initiate some fiscal consolidation,” said Standard Bank’s Samir Gadio, adding that if they do it this time, the central bank would most likely be “forced to tighten monetary conditions further”.

President Goodluck Jonathan won an election last year pledging to create jobs, boost woefully inadequate power supplies, unlock the world’s seventh largest gas reserves and reduce poverty.

But reform plans have stalled. A bill aimed at overhauling the energy sector has been stuck in parliament for years, while a proposed sovereign wealth fund, the 2012 budget and power privatisation plans are months behind schedule.

Despite record high oil prices last year, Nigeria’s foreign exchange reserves remained flat and oil savings fell. Nigeria is vulnerable to an oil price dip, but with prices at over $125 a barrel , revenues remain strong.

Despite rocketing growth, poverty is increasing in Nigeria owing largely to bad governance.

An NBS report a month ago showed poverty rose to 60.9 percent in 2010, compared with 54.7 percent in 2004, with almost 100 million people living on less than $1 a day.

“Growth without tangible development is a major risk to Nigeria’s outlook,” Gadio said.

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