The second quarter of 2023 witnessed a significant economic setback as twenty-six sectors, including food, textile, and others, experienced a collective loss exceeding N1 trillion. This contraction was highlighted by an examination of the Gross Domestic Product data furnished by the Nigerian Bureau of Statistics.
The amalgamated worth of these sectors took a hit of N1.16 trillion, as their cumulative contribution to the real GDP dwindled from N7.69 trillion in the initial quarter of 2023 to N6.54 trillion.
Among the industries that faced decline in Q2, 2023 were fishing, crude petroleum, natural gas, cement, food, beverage, tobacco, textile, apparel, footwear, wood products, pulp, paper, non-metallic items, basic metals, iron, steel, motor vehicles, assembly, manufacturing, construction, accommodation, food services, road transport, and air transport. Additionally, other areas negatively impacted during this quarter included post, courier services, publishing, motion pictures, sound recording, music production, arts, entertainment, recreation, financial institutions, real estate, professional, scientific, technical services, education, other services, metal ores, plastic, rubber products.
As per the recent GDP data release, the Nigerian Bureau of Statistics disclosed a modest increase in real GDP, marking a rise of 0.20 percentage points to 2.51 percent in Q2 2023, compared to 2.31 percent in Q1 2023. This growth rate, although an improvement, falls short of the 3.54 percent recorded in the second quarter of 2022, a reflection of the ongoing challenging economic conditions.
The initial quarter of 2023 was plagued by cash shortages, leading to a contraction from 3.52 percent in Q4 2022 to 2.31 percent in Q1 2023. The NBS underscored, “Gross Domestic Product registered a 2.31 percent year-on-year growth in real terms in Q1 2023. This rate of growth declined from 3.11 percent in the first quarter of 2022 and 3.52 percent in the fourth quarter of 2022, attributed to the negative impact of the cash crunch experienced during the quarter.”
Despite a 0.20 percentage point sequential expansion in Q2 2023, the prevailing harsh economic conditions have kept growth below the 3 percent mark. Inflation persisted in its upward trajectory, reaching 22.79 percent in June, marking the sixth consecutive month of escalation and intensifying the pressure on purchasing power.
The current trajectory of Nigeria’s GDP growth falls short of the International Monetary Fund’s projections, which envisioned a growth rate of 3.2 percent for 2023.
This downturn in economic activity has been linked to recent reforms, which, while anticipated to yield benefits in the long run, have posed short-term challenges. The elimination of fuel subsidies and the establishment of unified exchange rates have adversely affected businesses.
The Manufacturers Association of Nigeria reported that these changes compelled manufacturers to downsize their workforce due to the prevailing demanding economic landscape, leading to reduced productivity.
Speaking to The PUNCH, Segun Kuti-George, the National Vice Chairman of the Nigerian Association of Small-Scale Industrialists, emphasized the potential consequences: “A decline in GDP could lead to job losses, reflecting a decline in our output and reduced productivity.”
Musa Yusuf, CEO of the Centre for the Promotion of Private Enterprise, also shared concerns with The PUNCH, highlighting the negative impact of economic reforms on GDP growth.