Economists explore the factors behind increasing poverty in Nigeria, despite positive GDP performance.
Nigerian economists and financial experts have provided insights into the persistent poverty experienced by citizens in recent months, despite a reported 3.46 percent increase in the country’s Gross Domestic Product for the third quarter of 2024.
In separate interviews with OBASANJONEWS, notable figures such as Prof. Segun Ajibola, former President of the Council of the Chartered Institute of Bankers, Muda Yusuf, Executive Director of the Centre for the Promotion of Private Enterprise, and Mr. Idakolo Gbolade, CEO of SD & D Capital Management, shared their perspectives on this issue.
This analysis follows the announcement by Adeyemi Adeniran Adedeji, the statistician-general of the federation, indicating that Nigeria’s economy grew by 3.49 percent in Q3 2024, an increase from 3.19 percent in Q2 2024.
The services sector, which saw a growth of 5.19 percent, accounted for 53.58 percent of the total GDP, with key growth drivers identified as financial institutions, telecommunications, agriculture, transportation, and construction.
In contrast, the real sector, encompassing agriculture, manufacturing, mining, and industry, experienced only marginal growth of at least 2 percent.
Further examination revealed that Nigeria’s real economic activity for the third quarter of 2024 reached N20.115 trillion, surpassing the N18.285 trillion recorded in the previous second quarter of 2024.
The oil sector contributed 5.57 percent to the overall GDP, while the non-oil sector maintained its dominance with a 94.43 percent share and a growth rate of 3.37 percent.
President Bola Ahmed expressed his enthusiasm regarding the GDP increase in a statement released by his spokesperson, Sunday Dare, crediting this achievement to his efforts for a stronger economic boost.
However, despite the positive growth figures across various sectors, the overall well-being of many Nigerians remains unaffected, as they continue to face significant challenges with high headline and food inflation rates of 33.87 and 39.16 percent, respectively, in October.
The soaring prices of goods and services have diminished the purchasing power of the majority, leading to increased poverty levels due to disparities in distribution systems.
Prof. Ajibola emphasized the significant disparity between macroeconomic indicators and the micro-welfare conditions of citizens. He argued that while improvements in GDP and other macro-indices are important, they do not guarantee enhanced economic welfare for the populace.
He pointed out that despite positive macroeconomic trends in Nigeria since the 1970s, widespread poverty persists due to inequality and systemic imbalances in wealth distribution.
He noted that the link between macroeconomic performance and individual welfare is notably weak in Nigeria, which hinders the flow of benefits from macroeconomic successes to the general population.
For meaningful improvements in living standards for the vulnerable majority, he asserted that economic leaders must establish effective transmission mechanisms between macro and micro levels, highlighting a persistent challenge for Nigeria since its independence.
Nigeria has experienced significant yet inconsistent macroeconomic indicators since the 1970s; however, a large portion of the population remains impoverished due to persistent inequality and systemic imbalances in wealth distribution.
The weak link between macroeconomic performance and micro-level benefits means that the advantages of economic growth seldom reach the broader populace.
This disconnect is a primary factor contributing to the stark contrast between the affluent minority and the impoverished majority, a situation often described as distributive injustice.
It is imperative for the government to explore effective channels for redistributing the benefits of macroeconomic growth to the underprivileged, thereby mitigating issues of corruption and the extravagant consumption patterns of the elite.
Dr. Muda Yusuf, Executive Director of the Centre for the Promotion of Private Enterprise, acknowledged that Nigeria’s Q3 GDP growth is a positive development despite ongoing challenges.
He emphasized that the financial sector plays a pivotal role in this GDP report and urged the government to implement policies aimed at rectifying sectoral imbalances.
The recent economic development in Nigeria is noteworthy; despite facing numerous challenges, the country achieved a positive growth in gross domestic product, with an increase of 0.27 percent compared to the previous quarter.
A significant aspect of this growth is the prominence of the service sector, particularly driven by financial, transportation, and telecommunications industries.
However, it is concerning that the financial sector, which expanded by over 30 percent, stands out as the top performer amidst struggles in the real sector.
In contrast, the agriculture sector grew by 1.14 percent, manufacturing by 0.92 percent, real estate by 0.68 percent, and construction by 2.91 percent, highlighting a disparity that warrants policy attention.
The stark contrast between the financial sector’s growth and the real sector’s modest performance, averaging around 1 percent, raises alarms about the overall economic health.
Addressing the persistent dominance of the services sector is crucial, as it is essential to identify and mitigate the structural and macroeconomic barriers affecting the real sector.
Fostering growth in the real sector is vital for creating sustainable jobs, enhancing exports, and achieving a more diversified economy, necessitating a rebalancing of sectoral performance.
Air transportation’s contraction in the third quarter is concerning, highlighting the difficulties faced by the aviation industry. Additionally, the decline in oil refining is expected, particularly given the stagnant state of refineries until the establishment of Dangote Refinery in the second quarter.
The data serves as a crucial tool for policymakers to realign the economy and rectify sectoral disparities.
It is essential to ensure coherence between the financial and real sectors, as emphasized in a statement to OBASANJONEWS.
Gbolade remarked that the reported growth in Nigeria’s GDP and unemployment figures for the third quarter do not accurately represent the country’s economic reality.
He pointed out that the GDP increase of 3.46 percent, as reported by the National Bureau of Statistics, does not align with ongoing inflationary pressures, particularly in food prices, which significantly affect the populace.
The naira’s depreciation has diminished purchasing power, rendering the GDP growth ineffective in improving living standards.
Furthermore, the reported decline in unemployment does not reflect the true situation, as more Nigerians are either unemployed or underemployed compared to 2023.
The challenging business environment has prompted some multinational companies to relocate or downsize their operations.
He stated that even individuals currently in employment are inadequately compensated, and certain organizations are unable to meet the new minimum wage requirements.
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