Why Nigeria’s Non Oil Sector Is Moving At Snail Pace- Report

 

Nigeria's energy infrastructure is not keeping pace with needs

Yemisi Izuora

Nigeria’s non oil sector is facing multi faceted challenges despite various policy measures that government has put in place.

In the 2021, Q3, GDP report by the Center For The Promotion Of Private Enterprise, CPPE, an economist and Chief Executive Officer, CEO, of the Center, Dr. Muda Yusuf, observed that the sector is significantly challenged by macroeconomic instability, currency depreciation, forex liquidity and regulatory constraints.

The report also identified policy inconsistency, security of lives and property, structural bottlenecks and barriers to import and export trade and burdensome bureaucracy as other challenges of the sector.

Yusuf however attributed the recent positive growth trend in the GDP to rebound of domestic economic activities following the relaxation of restrictions on economic activities and movement within the country.

He also said revitalization of sectors that were earlier on lockdown following the onset of the COVID-19 pandemic such as the hospitality, entertainment, aviation, road transportation, tourism, among others helped in the turn around of the sector.

Yusuf, in addition noted that the positive trend could be traced to the restoration of supply chains that were disrupted at the inception of the pandemic, recovery of the global economy following improvements in investors sentiments as a result of improved vaccination in many parts of the world, rebound of commodity prices which had a positive impact on macro-economic outlook and crude oil price that has recorded an impressive recovery in last couple of months.

There are also base effect as a comparative benchmark for the computation of GDP was period of recession and economic stimulus programmes by monetary and fiscal authorities.

The report also analysed sectoral performance for the Q3, indicating sectors that recorded growth.

According to Yusuf, the 59.93 per cent growth performance in the rail sector was the highest sectoral performance during the period under review and this was driven largely by high passenger traffic in the rail sector especially along the Kaduna-Abuja axis and Warri-Ajaokuta axis, safety concerns as the rail system is considered safer than the roads, quality of the roads which often results in long travel time and risk of road accident and incidents of banditry and kidnapping on the highways.

The Metal Ores Sub-sectors also recorded an impressive 54.92 per cent growth driven by imperative of local sourcing of minerals for manufacturing and other processes as a result of a depreciating exchange rate and the liquidity problems in the foreign exchange market. This has led to increased demand for domestic solid minerals.

There is an increase in investment in solid minerals as s result of the opportunities created by the scarcity of foreign exchange for the importation of some of these minerals, the report noted.

Equally, the Air Transport Sector recorded an impressive rebound at 33.31 per cent growth. This positive trajectory was driven by resumption of economic activities across all sectors in the economy with a corresponding increase in mobility and velocity of circulation within the country, safety concerns around road transportation especially incidences of kidnapping and banditry on the highways.

This led to many travellers opting for flight as well as state of the roads and the long travel time.

 

Also, the Electricity, Gas and Steam Air- conditioner recorded a growth of 14.36 per cent this was as possibly a result of market segmentation models used by the Discos have impacted positively on the liquidity of the electricity providers.

Economic activities have since resumed as a result of the relaxation in the Covid protocols and the use of vaccines, thus leading to an increase in energy demand, especially for gas and electricity.

There is an increase in the use of gas for industries and households which impacted on its demand.

In addition, the Road Transportation sub-sector recorded a GDP growth of 21.11 per cent this again is impressive.

This was attributed to rebound of economic activities which led to increased physical mobility and connectivity within the economy, relaxation of movement which had hitherto affected road transportation and restoration of economic activities in sectors that were earlier on lockdown such as entertainment sector, the hospitality, aviation, etc.

The water transportation sector recorded a GDP growth of 16.30 per cent this was driven by increased use of inland waterways as a result of the rise in water levels especially along rivers Niger and Benue as well as increased use of badges especially around the Lagos area for the evacuation of cargo from the ports as a result of the congestion at the port

Yusuf also noted that the trade sector experienced a GDP growth of 11.9 per cent again this was as a result of the rebound of economic activities across all the sectors of the economy which impacted positively on trade and commerce, resumption of activities in sectors that were earlier on lockdown especially the entertainment and hospitality sector.

Other factors that helped the growth include restoration of supply chains locally and globally. Supply chains were earlier disrupted as a result of the pandemic. Therefore, the momentum of trade other commercial activities increased once the disruptions eased.

Also lifted of Lockdown of Some Economic Activities supported the sectors growth.

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