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HomeTop NewsEconomists project Nigeria's GDP growth at 2.5% in 2021

Economists project Nigeria’s GDP growth at 2.5% in 2021

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…attribute Q2 5.01% growth to base year effect of lockdown period

By Oludare Mayowa

Two renowned economists have attributed the highest surge in Nigeria’s economic growth in the second quarter of 2021 to the base year effects, which saw the country’s economy declined -6.1 percent in the second quarter last year.

According to them, Nigerian economy grew 5.01 percent in the second quarter because of the effect of the lockdown and paralysed economic activities a year earlier during the lockdown period to contain the spread of Covid-19 last year.

They, however, projected that the economy may grow by 2.5 percent at the end of the year barring all unforeseable circumstances.

The Managing Director, Chief economist at the Standard Chartered Bank, Razia Khan said the economy grew that much in the second quarter of 2021 because of the contraction in the Gross Domestic Product (GDP) in the second quarter of 2020.

“There should be no room for doubt – the 5.01 percent growth recorded in Q2 2021 was entirely a consequence of the contraction the year before,” Khan said in an email response to Global Financial Digest.

Also, Managing Director of Financial Derivatives Company (FDC), Bismarck Rewane said “The primary reason for the surge was due to base year effects.

“It was in the second quarter of 2020 that there was an unprecedented lockdown. Domestic and international flights were shut down, intercity travels were restricted and markets were shut.

“This resulted in the sharpest contraction of the economy in decades to -6.1 percent. Therefore, it is not surprising that the economy grew by gangbusters when compared to that period,” Rewane.

He said the impressive growth trajectory will only be sustained if complemented with strategic investment and increased stimulus in the job elastic sectors while reducing leakages emanating from misaligned exchange rates and subsidies.

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Rewane, however, said that “the new wave of COVID-19 is a major threat to these projections.”

In its economic bulletin for the month of August released by his company, Rewane said; “the average growth in H1’21 is now 2.70 percent. This implies that the Nigerian economy will need to grow at an average of 2.5 percent in the second half of the year to achieve the target growth of 2.5 percent-3.0 percent for 2021.

“While this seems possible, it will be a tall order when the level of activity is compared with Q3’20 – the period when re-opening and relaxation started and the Economic Sustainability Plan (ESP) and palliative stimulants were in play.

On her part, Khan said; “While we expect oil sector growth to gradually turn more positive in the quarters ahead, the favourable base effect that resulted in higher non-oil growth should fade in the coming quarters.

“Moreover, the third wave is still a risk. We expect the Q2 GDP print to be the peak for the year. “My full year growth forecast for 2021 is 2.5 percent.”

President Mohammadu Buhari had last week attributed the second quarter economic growth to the hard work and commitment of the managers of the economy and urged them to keep at it till the positive development “touches the lives and pockets of the average Nigerian.”

In a statement by his spokesman last week, President Buhari said; “it is gratifying to note that the various policies of the administration, aimed at boosting agricultural production, improving the business environment, and investing massively in infrastructure, are beginning to yield fruit.

“Equally gratifying is the complementary news of the steady decline in the rate of inflation, over the last few months.

“The positive effects of the Economic Sustainability Plan (ESP), which helped fast-track the country’s exit from the COVID-induced recession of 2020, continue to be evident, as some of the sectors driving the Q2 2021 growth have benefited or are benefiting from government-led interventions,” the president said in the statement.

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