In an economy with an average population growth rate of 2.6 percent, the recent real GDP growth of 2.25 percent implies that real GDP per capita growth has depreciated by 0.35 percent. This is a clear indication that more Nigerians have been thrown into the poverty trap and will also result in the country being downgraded from a middle-income to a low-income economy.
The Director General, Manufacturers Association of Nigeria, MAN, Segun Ajayi-Kadir stated the above while reacting to the third quarter 2022 GDP report released by the National Bureau of Statistics, NBS.
Achieving a stable rapidly-growing economy according to him would require taking head-on the daily bottlenecks confronted by business owners within the manufacturing sector, considering its active inter-linkages with other key sectoral drivers of the economy.
Speaking on Further Decline in Growth, he said, “the Nigerian economy is a mono-cultural economy that is overly dependent on the oil sector while other sectors continue to suffer from Dutch Disease. Surprisingly, the rise in oil price has contributed to several headwinds, such as increasing petroleum subsidies, increasing refining cost, limited investment in oil infrastructure and theft on the pipelines which have all retrogressed the oil sector. Hence, is projected that economic growth will decline further in subsequent quarters”.
On Slow Development, he added, “Nigeria’s credit rating will be further affected as high economic growth is one of the indictors of sustainable debt. In recent time, Moody’s and Fitsch had downgraded the country’s credit rating. It is expected that the credit rating will further worsen and significantly limit the country’s chances in sourcing for external development funds. This will inevitably slow down the pace of developmental projects”.
“On a year-on-year basis, the sector grew by -1.91 percent in the third quarter of 2022 compared to 4.29 percent in the third quarter of 2021 and 3 percent recorded in the second quarter of 2022. This represented a -6.2-percentage point and -4.91 percent point decline from the growth witnessed in 2021 Q3 and 2022 Q2 respectively. The overall decline in both aggregate and sectoral performances could have far-reaching adverse effects on the manufacturers”, he pointed out.
He listed dominant among these to include: Lower manufacturing turnover, slow infrastructural development & reduction in credit intervention and fall in manufacturing investment.
“The GDP growth slowdown will most likely result in higher unemployment rate. Coupled with high inflation rate, the economy is likely to face higher misery index that worsens the poverty level and further shifts consumers away from elastic manufactured goods. This will eventually result in drastic reduction of patronage and lower sales turnover”, he stressed.
“Heightened Forex Challenges: The slag in the diversification drive implies further dependence on imported raw material and machinery. Hence, the forex crisis bedeviling the sector is not likely to be resolved anytime soon”.
“Considering that the revenue generating capacity of the government is hampered by high unemployment, the limited funds will slow down the provision of infrastructure and credit facilities necessary to boost productivity of the manufacturing companies. Otherwise, the government will resort into more borrowings and put the country in debt peonage”, maintained the DG.
“The negative growth of the sector’s GDP sends a strong signal to potential investors in the sector. The impending result is negative investors’ sentiments and pessimism against provision of critical raw materials, technology and technical know-how required to promote the industry”.
“Nigeria’s path to economic growth, industrialization and sustainable development has been compromised by inadequate attention to the numerous pressing challenges of the manufacturers who are meant to be the propellers of its long-term economic agenda”, stated Ajayi-Kadir.