Telecoms and Agric sectors slow down Nigeria’s economic recovery

Telecoms and Agric sectors slow down Nigeria’s economic recovery

Data from the National Bureau of Statistics reveals Nigeria recorded a real GDP growth rate of 0.51% in the first quarter of 2021. This follows a GDP growth rate of 0.11% in the 4th quarter of 2020, which effectively got Nigeria out of recession.

At 0.51% Nigeria avoided a possible double-dip recession as fears over Nigeria’s galloping inflation, unpopular government policies and insecurity slowed down economic activities in key sectors of the economy. Despite these challenges, the 0.5% GDP growth rate is tepid and nowhere close to breathing confidence into the economy.

A cursory review of the GDP suggests the reason for the slow GDP growth in the first quarter of the year was the performance of the telecoms sector. Nigeria’s telecoms sector has been the major driver of economic growth in the last three quarters and was a major factor in leading Nigeria out of a recession.

According to the latest data, Nigeria’s telecommunications sector recorded a GDP growth rate of 7.69% the slowest since the first quarter of 2018 when it grew at just 1.88%. Nigeria’s telecoms sector constitutes about 11.66% of real GDP, thus one of the largest sectors in the economy. In the third and last quarter of 2020, the sector grew at 17.36% and 17.65% respectively. In the corresponding first quarter of 2020 and 2019, it grew at 9.71% and 12.18% respectively.

For example, when compared to the other 4 sub-sectors of the economy, Information and Communication (of which telecommunication is over 95%) grew the least during the quarter. It went from 14.7% in the 4th quarter of 2020 to 6.31% this quarter (telecommunications which is a sub-sector, grew 7.69%).

Meanwhile, Agriculture grew 2.28% compared to 3.42%. Manufacturing got out of recession growing by 3.4%. Trade contracted slower from -3.2% to -2.43%. Construction also rose by 1.42% compared to 1.21% in the 4th quarter of 2020. Nairametrics analysis indicates Nigeria may have recorded a GDP growth rate of at least 1.7% if Agriculture and Information and Communication sectors had continued with the same growth trajectory as they did in the 4th quarter of 2020.

Agriculture, for example, is driven mainly by the Crop Production sub-sector which constitutes about 19% of GDP and 87% of the Sector. GDP growth rate in the sector slowed to 2.31% in Q1 2021 compared to 3.68% in Q4 2020.

Why the sluggish growth in these sectors?

The slow growth in these sectors can be attributed to several factors such as insecurity, government policy actions and galloping inflation.

  • For the agriculture sector, nationwide insecurity challenges have negatively affected farm yields as well as produce distributions across the country.
  • Clashes between herders and farmers have set politicians in the northern part of the country against those in the southern part with bans on open grazing by the latter drawing criticisms up north.
  • For the telecoms sector, the ban on new SIM card registrations which spanned the entire first quarter of the year affected growth in new subscriber numbers that drove GDP growth rate for the sector in 2020.
  • For example, in the first quarter of 2021, active GSM lines rose to 188.8 million from 173 million in the corresponding quarter in 2020. By the end of December 2020, we had about 204 million subscribers. But by the end of March 2021, GSM numbers dropped to 192 million.
  • Whilst GSM companies reported double-digit growth in revenues during the quarter, the impact of some government policies was significant enough to stall growth.
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