Why Nigerians are poorer amid GDP growth – Economists

Nigerian economists and financial experts have explained why citizens have remained poorer in the past months despite the country’s Gross Domestic Product rising by 3.46 percent in the third quarter of 2024.

Former President of the Council of the Chartered Institute of Bankers, Prof. Segun Ajibola, the Executive Director of the Centre for the Promotion of Private Enterprise, Muda Yusuf, and CEO of SD & D Capital Management, Mr. Idakolo Gbolade, disclosed this to DAILY POST in separate interviews on Monday.

This comes as Adeyemi Adeniran Adedeji, statistician-general of the federation, announced on Monday that Nigeria’s economy expanded by 3.49 percent in Q3 2024 from 3.19 percent recorded in Q2 2024.

Services sector, which recorded a growth of 5.19 percent, contributed 53.58 percent to the aggregate GDP.

Key drivers of growth included financial institutions, telecommunications, agriculture, transportation, and construction.

Meanwhile, the real sector, such as agriculture, manufacturing, mining and the industrial sector, recorded a marginal growth of at least 2 percent.

Further analysis showed that Nigeria’s economic activity in real terms for Q3 2024 stood at N20.115 trillion, which is higher than the rates recorded in the preceding Q2 of 2024, which stood at N18.285 trillion.

The oil sector’s contribution to overall GDP stood at 5.57 percent.

The non-oil sector continued to dominate, contributing 94.43 percent of GDP in real terms and achieving a growth rate of 3.37 percent.

President Bola Ahmed on Monday, in a statement through his spokesperson, Sunday Dare, expressed excitement over Nigeria’s GDP rise.

He attributed the figure to his quest for a more robust boost in the economy.

Despite the growth figure recorded across sectors, this has not impacted the well-being of the generality of Nigerians.

This is the case as Nigerians battle high headlines and food inflation, which stood at 33.87 and 39.16 percent in October.

The skyrocketing prices of goods and services have eroded the purchasing power of the majority of Nigerians.

Nigerians are poorer due to imbalances in distribution systems

Reacting, Prof. Ajibola noted that there is a wall of difference between macroeconomic indexes and the micro-welfarist state of the citizenry.

He said that improvements in GDP or macro-indices are not sufficient conditions for improved economic welfare of the people.

He stressed that from the 1970s to date, Nigeria’s macro-indices have been positive, but the majority of the people remain poor because of inequality and imbalances that dogged the distributive system.

According to him, the transmission between the macro and the micro is very weak in Nigeria, which is the reason the benefits of macroeconomic performances are hardly cascaded down to the masses.

“There is a wall of difference between macroeconomic indexes and the micro-welfarist state of the citizenry.

“Improvements in macro-indices are necessary but not sufficient conditions for improved economic welfare of the people.

“Indices such as economic growth rate, foreign exchange reserves, debt service ratio, among others, set the pace and provide the impetus for improved standards of living for the vulnerable majority in a country like Nigeria.

“But for that to happen, the economic managers must be capable of creating strong transmission mechanisms between the macro and micro levels. There lies the challenge of a country like Nigeria from independence to date.

“Nigeria continues to witness strong though fluctuating macro indices from the 1970s, but the majority of the people remain poor because of inequality and imbalances that dogged the distributive system.

“The transmission between the macro and the micro is very weak; hence, what ought to be the benefits of macroeconomic performances are hardly cascaded down to the masses.

“The disconnect provides the major explanation for the dichotomy between the rich few and the poor majority. In economic parlance, this is referred to as distributive injustice.

“The government needs to examine the channels for distributing the gains of macro-indices to the downtrodden to reduce corruption, conversion, and ostentatious and conspicuous consumption habits by the privileged few.”

CPPE identifies major fault in Nigeria’s Q3 GDP growth

On his part, the Executive Director of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, said that Nigeria’s Q3 GDP is a good development despite the challenges Nigeria faces.

He, however, asserted that the financial sector is the largest contributor to the GDP report.

This comes as Yusuf advocated that the government should consider policy to address the sectoral imbalances.

“It is a good development; despite the challenges Nigeria faces in the economy, the country was able to record positive gross domestic product growth. We had an improvement of 0.27 percent over the second quarter GDP growth performance.

“The key thing is the performance: the dominance of the service sector. Drivers are the financial, transportation, and telecommunications sectors.

“The aberration one has to observe is that the best performing sector in the GDP is the financial sector.

“It grew by over 30 percent. It is incredible at a time when the real sector of the economy is struggling.

“The agriculture sector managed to record 1.14 percent, the manufacturing sector grew by 0.92 percent, the real estate sector grew by 0.68 percent, and the construction sector grew by 2.91 percent. This aberration is something that needs to be looked into from a policy standpoint.

“You can’t have a situation where the financial sector is growing at 30 percent while the real sector is growing at an average of 1 percent. This is not particularly cheery news.

“We need to look at the continued dominance of the services sector and look at all the structural and macroeconomic impediments to the real sector.

“It is in the real sector that you can create more sustainable jobs, generate exports, and make the economy more diversified. We need more rebalancing of sectoral economy performance.

“It is worrisome that air transportation contracted in Q3. This is a reflection of the challenges the aviation sector is facing. Oil refining also contracted, which is not surprising given the moribund nation of all the refineries until Q2 when Dangote Refinery set in.

“The essence of the data is to guide policymakers to recalibrate the economy and address sectoral imbalances. More importantly, there needs to be alignment between the financial sector and real sector. Nigeria’s GDP rise, unemployment figure don’t reflect reality

On his part, Gbolade stated that Nigeria’s Q3 GDP growth and unemployment data are not reflections of the country’s economic situation.

He stressed that the data was not in consonance with inflationary trends.

“The GDP rising by 3.46 percent in the 3rd quarter, according to NBS, is not reflective of the economic situation of the country because statistical data is not in consonance with the inflationary trend and food inflation is not reducing, which is the main data that can impact Nigerians positively.

“The depreciation of the naira has led to reduced purchasing power, which increased GDP cannot influence.

“The decline in unemployment rate is also not in tune with reality because there are more Nigerians out of employment or underemployed now than in 2023, and the unfriendly business environment has led some multinationals to relocate to other countries, while others have downsized.

“Those that are even presently employed are underpaid, and some organisations cannot even afford the new minimum wage,” he said.