Tinubu Pressured as Job-Creating Sectors Suffer

In the second quarter of 2023, Nigeria’s growth rate slowed to 2.51 percent, compared to the same period last year, as job-creating sectors struggled against headwinds, increasing the pressure on President Bola Tinubu to reform the economy. The economic growth data, which represents the eleventh consecutive quarter of growth, is the first to be released since Tinubu initiated reforms aimed at bolstering output, which had been stagnant for several years.

The National Bureau of Statistics (NBS) reported on Friday: “This growth rate is lower than the 3.54 percent recorded in the second quarter of 2022 and may be attributed to the challenging economic conditions currently being experienced.”

The Q2 growth rate is however greater than the 2.31 percent recorded in the previous quarter, when the nation experienced an unprecedented cash shortage that hampered economic activity.

“An all-out endeavor is required to remove oil from Nigeria’s fiscal base. In an economic downturn, it will be difficult to raise revenue. For long-term sustainability, however, fiscal reforms, particularly the creation of a more stable revenue base, will be required, according to a senior chief economist in response to a question.

“Priority expenditures must be safeguarded. While capital expenditures stimulate expansion, it is necessary to reduce recurring expenditures,” he added.

CardinalStone, a multi-asset investment management firm, reported that the Q2 GDP result was less than the consensus estimate of 2.8% year on year due to a faster-than-anticipated decline in the energy sector. The country’s energy activities decreased by 13.4 percent year-over-year, and oil production reached its second-lowest level since 2013 at 1.22 million barrels per day.

The energy sector contributed 5.34 percent to Nigeria’s real GDP in the second quarter, down from 6.33 percent in the same period of 2022 and 6.21 percent in the previous quarter. Niyi Awodeyi, the chief executive officer of Subterra Energy Resources Limited, cited the absence of strategy on the part of politicians as a major contributor to “this bleak economic situation.”

Awodeyi stated that the government has not developed its own vision for energy security. As with his predecessor Muhammadu Buhari, Tinubu appears poised to lead the Ministry of Petroleum Resources. The last eight years of Buhari’s tenure as petroleum minister left much to be desired. Wunmi Iledare, a renowned energy expert, stated that the responsibilities outlined in the Petroleum Industry Act (PIA) for the Minister of Petroleum are formidable.

Aside from the oil sector, other experts have raised concerns about why sectors of the economy that are collectively responsible for the majority of job creation are delivering less growth than in previous years, a trend that indicates that additional jobs cannot be created at this time. The NBS reported that the manufacturing sector’s real GDP growth was 2.2% in the second quarter of 2023, the lowest since the second quarter of 2020.

According to the NBS report, the manufacturing sector contributed 8.62 percent to the GDP in the second quarter of 2023, down from 8.65 percent in the same quarter of 2022. Luqman Agboola, head of research at Sofidam Capital, stated, “When the largest sectors of the economy – agriculture and trade – are performing this poorly, it means that the unemployment situation is not about to improve, and that is what must be done to open the economy up quickly.”

The agriculture sector expanded by 1.50 percent, an increase from the 1.20 percent expansion recorded in the second quarter of 2022. The agricultural sector, a major employer of labor, has been beset by low productivity and rising insecurity, such as terrorism, banditry, and herdsmen attacks, which threaten farmers and their investments, according to analysts.

“Policymakers still have much work to do to help these sectors realize their growth potential,” Agboola said.

Damilola Adewale, an economic analyst based in Lagos, remarked that these crucial sectors for job creation continue to struggle with growth, and their capacity to generate employment opportunities may not be restored in the near future. Many unemployed Nigerians are seeking opportunities to travel abroad as a result of the country’s uncertain economic climate, resulting in a massive brain outflow that is harming the labor force of Africa’s largest economy.

He stated, “Until these industries achieve double-digit growth, there will be no employment prospects.”

The number of Nigerian health and care employees granted work visas by the United Kingdom more than tripled within a year, according to data from the British government. In June of last year, the Tinubu administration’s Policy Advisory Council presented an ambitious plan to propel Nigeria’s economy to $1 trillion within the next eight years.

To reach its goal, the council stated that a state of emergency must be declared in revenue generation and national security, transforming key agencies such as the Federal Inland Revenue Service, Nigerian Customs Service, and Nigerian Maritime Administration and Safety Agency into the Nigerian Revenue Service, which will collect all direct and indirect taxes and levies on behalf of the Federal Government.

In addition, it listed the reform of the central bank, the implementation of civil service reform/the Oronsaye report, the unlocking of the potential of the solid minerals sector, the making of interim leadership appointments (to be ratified later by the National Assembly), and the temporary increase in fiscal circuit breakers, such as debt limits, which would be ratified later by the National Assembly.