Nigeria’s gross domestic product (GDP) grew slower in the first quarter (Q1) of 2023. The growth rate in the quarter stood at 2.31 percent, a year-on-year decline from 3.11 percent reported in the Q1 of 2022.
The Q1 2023 figure also represents a decline from 3.52 percent recorded in Q4 2022. These were revealed by the National Bureau of Statistics (NBS), Nigeria’s data agency, on Wednesday.
Nigeria’s real GDP stood at N17.75 trillion in Q1 2023.
Non-oil sector accounted for 93.79 percent of the total GDP, while the oil sector accounted for 6.21 percent.
The NBS attributed the decline in the growth rate to the adverse effects of the cash crunch experienced during the quarter.
Highest and lowest contributors to GDP
Crop production, which falls under the agricultural sector, contributed highest numbers to GDP in the quarter under review. The sector constituted about 19.5 percent of the total GDP, followed by trade as well as telecommunications and information services. While trade contributed 16 percent to GDP, telecommunications and information services had a share of 14.1 percent.
Rail transport and pipelines, electrical and electronics, quarrying as well as other minerals contributed nothing to the GDP in the first quarter of 2023. At the same time, some sectors such as publishing, transport and courier services made lowest contributions to the GDP within the quarter. Their shares of the GDP were less than one percent.
What is GDP?
It is critical to explain the meaning of GDP so that Nigerians will know how it affects them. According to Investopedia, an investment dictionary, the GDP is “the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.” This means that GDP calculates all the economic activities carried out within a year in a country or area. For instance, the monetary value of a refinery may be calculated as part of the GDP as well as money a consumer spends while buying a car.
However, such calculations depend on the method chosen by a statistical agency such as the NBS. Hence the GDP may be calculated using income, expenditure or output methods. While the expenditure approach calculates spending of all the groups in an economy, the income approach computes earnings by all the factors of production in an economy. For example, an income approach will factor in wages/salaries of workers, rent on land, return on capital in the form of profits and interests.
On the other hand, the output approach calculates the total value of economic output or productive activities. No matter which one is used, the agency calculating it will arrive at the same result,
GDP is, however, divided broadly into nominal and real GDP. While nominal GDP calculates all the ecionomic activities, the real GDP subtracts the impact of inflation on the economy. The real GDP is therefore more important for policy makers and investors as it shows them the direction of the economy.
The GDP of a nation often shows sectors that are doing better than others or where real opportunitoes are in an economy. For instance, Nigeria’s GDP has shown that there are opportunities in the services sector which constitute half of the GDP.
Is GDP drop inevitable
Fitch Solutions, the research arm of credit rating agency Fitch Ratings, in its Africa Monthly Outlook report, had predicted that Nigeria’s economy would grow by only 2.3 percent in 2023, down from 3.1 per cent in 2022. Flitch Solutions attributed the fall to the acute cash crunch in the first quarter that marred economic activities in Nigeria’s economy.
The CBN cashless policy experiment demonstrated that cash reigns supreme in Africa’s biggest economy. Due to either a lack of bank accounts or a pattern of failed payments, most nano and micro enterprises needed help accepting electronic transfers.
Many households and individuals were forced to pay high fees to POS agents to obtain cash.
Nigeria’s N200 trillion economy was in dire straits due to banks’ temporarily shut-down to stranded Nigerians.
An economist and banker, Ms Abosede Ojo, told Dataphyte that GDP growth was one of many indices that the CBN’s cashless policy affected, stressing that Nigeria’s economy was practically at a standstill during the cash crunch period, with many suffering hardship.
According to a report by the Centre for the Promotion of Private Enterprise (CPPE), Nigeria lost N20 trillion to the cashless policy.
The report said in March that the economy was gradually grinding to a halt because of the collapse of payment systems across all platforms, noting that digital platforms were performing sub-optimally due to congestion.
“Physical cash is unavailable because the CBN has sucked away over 70% of cash in the economy; and the expected relief from the supreme court judgement has not materialized. The citizens are consequently left in a quandary,” the CPPE said in a March report.
The body therefore predicted a decline in GDP growth in the first quarter of 2023.