Lukman Otunuga, an economic expert with penchant in the currency market, has rued that Nigeria’s web of alternative foreign exchanges remains a major stumbling block to a sustainable economic recovery while also effectively repelling FDI.
Otunuga, a research analyst at FXTM was reacting to a detailed data released from the National Bureau of Statistics, in the fourth quarter of 2016, showing the nation’s Gross Domestic Product (GDP) contracted by -1.30 per cent (year-on-year) in real terms, from N18,533.75 billion in Q4 2015 to N18,292.95 billion in Q4 2016.
He aligned with the school of thought that the Gross Domestic Product (GDP) of the Nigerian economy has continued to dwindle due to factors ranging from weaker inflation, induced consumption demand, an increase in pipeline vandalism, significant reduced foreign reserves and a concomitantly weaker currency and problems in the energy sector such as fuel shortages and lower electricity generation.
According to Otunuga, “Nigeria’s full-year economic contraction of -1.5% for 2016 continues to highlight how the terrible combination of depressed oil prices, foreign exchange shortages and overall sluggish economic fundamentals have exposed the nation to downside shocks”.
Meanwhile, the NBS report shows the decline was less severe than the decline recorded in the previous quarter, of -2.24 per cent, but was nevertheless lower than the growth rate recorded in the final quarter of 2015, of 2.11 per cent.
Quarter-on-quarter, real GDP increased by 4.09 per cent, which partly reflects seasonal factors as well as a rise in the general price level.
For the full year 2016, the GDP contracted by -1.51%, indicating real GDP of N67,984.20 billion for the year. Nominal GDP was N29,292,998.54 million at basic prices in the fourth quarter of 2016, which represents year on year nominal growth of 12.97 per cent.
In contrast to real growth, this is 5.84 per cent points higher than the rate recorded in the same quarter of 2015, implying that the GDP deflator increased faster than the earlier period. For full year 2016, aggregate nominal GDP stood at N101,598,482.13 compared to N94,144,960.45.
During the period under review, oil sector contributed 8.07 per cent to the growth of the GDP with an estimated production of 1.90million barrels per day.
However, for the full year, oil production was estimated to be 1.833million barrels per day, compared to 2.13million barrels per day in 2015.
The reduction was largely due to vandalism in the Niger Delta region and as a result, the sector contracted by -13.65 per cent, a more significant decline than that in 2015 of -5.45 per cent which reduced the oil sectors share of real GDP to 8.42 per cent in 2016, compared to 9.61 per cent in 2015.
The non-oil sector contributed its share of GDP to 92.85 per cent from 91.94 per cent in the fourth quarter of 2015.
Commenting on the report, Otunuga said, “Nigeria’s full-year economic contraction of -1.5% for 2016 continues to highlight how the terrible combination of depressed oil prices, foreign exchange shortages and overall sluggish economic fundamentals have exposed the nation to downside shocks. While the outlook for Nigeria still remains bearish in the short term, it must be kept in mind that markets have acknowledged that the nation is currently in the process of a critical structural transformation”.
He however, added that since the start of the year, the positive report of a successful Eurobond issue coupled with recent interventions from the CBN has bolstered investor risk sentiment towards the nation.
“It should be understood that Nigeria’s web of alternative foreign exchanges remains a major stumbling block to a sustainable economic recovery while also effectively repelling FDI. While recent reports of the CBN releasing an additional $180 million to the forex markets in an effort to ease business transactions may strengthen the Naira further, speculations are rife over the central bank devaluing the local currency to improve liquidity and regain more stability”.