Nigeria’s economy is finally recovering from the nightmare of the pandemic. According to the National Bureau of Statistics (NBS), the country’s gross domestic product (GDP) increased by 0.51% in the first quarter of 2021.
This is a notable increase from the 0.11% growth in the fourth quarter of 2020. It also marks the second consecutive quarterly growth since the economy fell into recession.
In total, the aggregate GDP stood at N40 trillion in nominal terms. This
performance is higher when compared to the first quarter of 2020 which recorded aggregate GDP of N35.6 trillion.
28 out of 46 Sectors recorded positive real growth in Q1 2021.
ICT Contribution dropped below 10%
Throughout the pandemic, the ICT sector was one of the major contributors to Nigeria’s GDP. In Q2 2020, the sector’s contribution grew as high as 17.83%.
However, the contribution of the ICT sector has dropped below 10% in Q1 2021. According to NBS, the sector brought in about 9.91% of to total GDP in Q1 2021, lower than the 10.31% recorded in the same quarter of 2020 and 10.58% contributed in the preceding quarter.
The Information and Communications sector comprises of Telecommunications and Information Services, Publishing, Motion Picture, Sound Recording and Music Production, and Broadcasting.
The drop in GDP contribution was a result of the overall drop in the sector’s GDP growth from 8.94% in Q1 2020 to 7.86% in the first quarter of 2021. Similarly, the rate dropped about 8.46% points lower than the rate recorded in the preceding quarter.
However, its contributions to the GDP is still higher when compared to crude oil, the country’s prize commodity. The oil sector contributed just 9.25%.
As a subsector, Telecommunications and Information Services had a growth rate of about 7.69%, a significant drop from 17.64% in the previous quarter and well below the 9.71% recorded in Q1 2020.
Reviewing the sector during the quarter, the most probable cause of the reduction in growth is the drop in telecom subscribers across operators following the SIM registration ban.
The decline could have resulted in a drop in revenue as fewer subscribers means less tax for the government, from airtime and data purchase during the period.
Oil Revenue recovers but still below Pre-pandemic levels
A breakdown shows that the recovery in oil production drove the growth recorded in the Q1 GDP numbers. The report shows that the number of barrels produced per day (mbpd), increased to 1.72 mbpd from the 1.56 mbpd in Q4 2020. This is, however, still lower than the 2.07 mbpd recorded pre-pandemic.
This resulted in a 35.65% increase of the oil sectors GDP growth rate from -19.76% in Q4 2020 to -2.21% in Q1 2021. However, the growth is still below the 5.06% growth seen in Q1 last year.
In terms of contribution to aggregate GDP, the oil sector accounted for 9.25% during the quarter. This is a significant increase from the 5.87% contributed in the preceding quarter but slightly lower than the 9.5% recorded during the same period last year.
Asides from oil, other drivers include Agriculture (Crop Production); Manufacturing (Food, Beverage & Tobacco); Real Estate; Construction and Human Health & Social Services.
What recovering GDP means
The slight increase in GDP growth during the quarter indicates a slow but continuous recovery of the country’s economy. Despite the slow pace, it means that business activities are moving in a positive direction.
Although its effect may not be instantaneous, with time starting businesses may become easier. It’s also possible that more jobs are created especially if growth continues into the second quarter of the year.
Similarly, the increase in oil revenue poses a strong possibility for the Naira to gain against the dollar. As a consequence, the cost of running businesses may drop thereby returning the price of goods that have spiked.
Although ICT contribution for the quarter dropped, the sector has shown that it has the potential to help the country’s economy recover from the effects of the pandemic.
Going forward, with oil production already growing, more efforts into the ICT revenue in the country could reduce the recovery time significantly.