By Charles Okonji
The Centre for the Promotion of Private Enterprise (CPPE) has stated that the country’s Gross Domestic Product (GDP) growth remained weak and fragile as it slowed to 2.31 percent in the first quarter (Q1) of 2023, from 3.5 percent in the fourth quarter (Q4) of 2022.
This was contained in the half year economic review of the CPPE, which was made available to the press. The sectors that contracted included agriculture, which thinned by 0.9 per cent, the first time in about a decade.
According to the Director of CPPE, Dr. Muda Yusuf, the livestock subsector was the worst hit as it contracted by a staggering 30.6 percent, stating that other sectors that contracted include oil refining which contracted by 35.8 percent; textiles, 3.7 percent; rail transportation, 49 percent; and insurance, 8.0 percent.
“Sectors that posted positive growth numbers were manufacturing , which grew by a marginal 1.6 percent; food and beverage, 3.9 percent; chemical and pharmaceutical, 6.2 percent; vehicle assembly, 5.4 percent; road transport, 8.0 percent; ICT, 11 percent; financial institutions, 25 percent; and real estate, 1.7 percent,” he stated.
The CPPE Director expressed that the major headwinds to growth were the naira redesign policy of the central bank, persistent dysfunctional foreign exchange policy, the political transition processes, weak recovery of oil production and the intractable challenge of insecurity in parts of the country.
Commenting on the economic outlook of the second half of 2023, Dr. Yusuf noted that the Tinubu administration is charting a new and positive course for the economy, which portends bright prospects for recovery and growth.
He noted, “Already, there are clear indications of elevated investors’ confidence, improvement in the government fiscal space, higher prospects of exchange rate stability in the near term, and positive expectations of better economic governance. The short to medium term outlook for forex liquidity is very good and prospect of increased inflow of capital is very bright.”
Dr. Yusuf pointed out that there is an urgent need to address the social outcomes of the recent reforms, especially the inflationary pressure induced by the fuel subsidy removal.
He said, “Urgent measures need to be put in place to mitigate the soaring cost of living and the escalating operating and production costs, especially for businesses.
“Inflationary pressures may intensify in the near term, the exchange rate may come under pressure in the short term as foreign exchange (forex) demand backlog exerts pressure on the official forex window. But the pressure is expected to ease before the end of the year. This would pave way for an equilibrium exchange rate which would be more tolerable and sustainable. Meanwhile the CBN should put in place a sustainable intervention framework to moderate the volatility in the forex market.
“With a better fiscal space, the outlook for lower fiscal deficit, moderation in the growth of public debt, reduction in debt service burden, and an improvement in the macroeconomic stability are very positive. All of these would impact on economic growth prospects in the second half of the year.
“Meanwhile, the Tinubu administration needs to promptly deploy measures to mitigate the current headwinds inflicted by the current reforms. The interventions should be a mix of direct interventions, tax incentives for low-income employees and small businesses, reduction in import duty on some critical intermediate products for key sectors of the economy, import duty concessions for the transportation, health, power and energy sectors. The improved fiscal space created by the reforms should make these mitigating measures feasible and they have to be implemented urgently in order to give the current reforms a human face.”
