Comercio Partners, an investment and advisory firm, has urged caution regarding Nigeria’s rising GDP growth rate, warning that economic expansion may not necessarily translate to an improved standard of living.
The firm’s comments come in response to the latest National Bureau of Statistics’ report, which revealed a 3.19% GDP growth, largely driven by increased crude oil output.
The firm warns that Nigeria’s economy may be “immiserizing,” where GDP growth fails to improve living standards.
Nigeria’s economic growth may not benefit its citizens due to high inflation of over 33% and a hawkish interest rate of 26.75%. According to Hanke’s Misery Index, which considers these factors, the country’s current score is 61.96%, indicating intense pressure on the population despite reported economic gains.
The report states, “Despite recent growth, caution is warranted as Nigeria’s economic expansion may be ‘immiserizing,’ where increased GDP does not translate into improved living standards. With unemployment rate of 5%, inflation at 33.40%, and a challenging interest rate environment of 26.75% , this erode the potential benefits of this growth.”
“The GDP growth in Q2 2024 signals cautious optimism, with continued expansion contingent on addressing sector-specific challenges and stabilizing key growth drivers.”
The report, however, pointed out that the energy sector presents a more nuanced situation. While oil production saw an increase from Q2 2023 to Q2 2024, the decline from Q1 2024 underscores ongoing challenges that could threaten future growth.
Additionally, the firm expressed concern over the slowdown in non-oil sector growth compared to Q2 2023, particularly within manufacturing and agriculture, indicating potential vulnerabilities. To ensure sustained GDP growth, it is crucial that the services sector maintains its momentum and the industry sector continues its recovery.
Addressing the downward trends in agriculture and manufacturing is essential for achieving balanced and inclusive economic growth.
According to the NBS Nigeria’s economy expanded by 3.19% year-on-year in real terms during the second quarter of 2024, exceeding the 2.51% growth recorded in the same quarter of 2023 and the 2.98% growth observed in the first quarter of 2024.
The economic growth contrasts with macroeconomic realities in the nation with elevated cost of living triggered by weakened naira reaching N1600/$ on the official market.
Furthermore, the CBN has hiked interest rate by 800 basis points since February this year thereby increasing the cost of accessing capital for businesses.
