Nigeria, a country facing significant economic challenges, continues to grapple with political instability, weak governance, volatile oil prices, and security concerns. These factors have a direct impact on its growth trajectory and pose various obstacles to its economic development. In such a context, the availability of accurate economic data becomes crucial in guiding policy decisions, retaining investor confidence, and ensuring public trust in the government’s economic management.
One key indicator used to measure the performance of an economy is the Gross Domestic Product (GDP). Nigeria’s National Bureau of Statistics (NBS) reported a slowdown in GDP growth to 2.31% (year-on-year) in the first quarter of 2023, significantly lower than the 3.52% recorded in the previous quarter. This decline can be attributed to factors such as a decrease in crude oil production, the policy-induced cash crunch, and reduced economic activities that are typical at the beginning of a new year. Crude oil production, for example, dropped from 1.8 million barrels per day in Q4 2022 to 1.51 million barrels per day in Q1 2023.
The cash crunch resulting from the Naira redesign policy had wide-ranging effects on the economy, leading to constrained business activities, job losses, and a notable decrease in overall productivity throughout the period. However, the NBS reported a GDP growth of 2.51% (year-on-year) in real terms for the second quarter of 2023. This figure contradicted previous narratives and research conducted by SBM Intelligence. Interestingly, the agriculture sector experienced a growth rate of 4.42%, while the service sector grew by 1.50%. These findings raise concerns, considering the prevailing realities of that quarter.
Businesses in Nigeria were particularly affected by the ripple effects of the cash crunch. According to a report titled “Strapped: Impact of the cash scarcity on individuals and businesses,” farmers in the agriculture sector experienced a decline in spending, resulting in reduced production and an inability to pay for labor. Trade volumes were also affected since many transactions in rural areas and the informal sector rely on cash. To cope with the situation, traders implemented various strategies, such as reducing product values, offering discounts for cash payments, and engaging in barter trade. The cash crunch also made transportation and feeding more challenging, as transportation workers had to resort to using Point of Sale (PoS) machines for payment, and food sellers had to lower prices and barter goods to meet their needs.
The impact of the cash shortage on Nigeria’s economy was further highlighted in the April 2023 UN Trade and Development report update. The United Nations Conference on Trade and Development noted that the shortage of cash, triggered by the replacement of high-denomination currency, significantly hindered economic activities in the informal sector.
Against this backdrop, it becomes crucial to closely examine the methodology used by Nigeria’s statistics office in arriving at the 2.51% growth rate for the second quarter. The GDP figure presents a seemingly optimistic picture of economic growth but masks unresolved issues, including overdependence on oil revenue, foreign exchange unavailability, poor economic policies like the Naira redesign, an unaccounted-for informal economy, income inequality, and insecurity that negatively impact economic activities. Addressing these underlying factors requires accurate and reliable economic statistics that reflect the reality faced by Nigerians. Failure to do so may erode public trust in the statistics agency, delay the implementation of effective policy measures, and discourage foreign investors from engaging in the Nigerian business environment. It is therefore essential for the NBS to foster transparency by sharing their methodologies, data sources, and assumptions, ultimately ensuring effective governance through accurate and reliable economic data.