Controversy emerges over NBS’ Q1’21 GDP statistics

For the first time in its recent reporting records, the National Bureau of Statistics, NBS, may be confronted with controversy over its headline macroeconomic statistics, the gross domestic product, GDP.

The organised private sector, OPS, has rejected the seemingly positive real sector figures in the first quarter GDP announced last week by NBS. They argue that facts on ground in the real sector do not support the NBS figures, though they described the statistics as “pleasant surprises”.

NBS had stated in its Q1’21 GDP Report that the manufacturing sector grew by 3.4 percent in the quarter as against -1.51 percent (decline) in Q4’20.

Speaking to  Financial Vanguard  after the release of the NBS statistics, Director-General, Lagos Chamber of Commerce and Industry, LCCI, Dr. Muda Yusuf, noted that the reported recovery of the manufacturing sector, though a pleasant surprise, is not reflective of the sector’s current realities.

Yusuf stated: “The recovery of manufacturing from a negative growth territory in the fourth quarter, Q4’20, to a positive growth level of 3.4 percent in Q1’21 was a pleasant surprise.

The sector has been grappling with an unprecedented foreign exchange illiquidity crisis over the past few months.   This is coupled with the structural,  policy, institutional and macroeconomic challenges that have bedevilled the sector.

“The data does not reflect the reality of the experiences of most manufacturers. Most foreign exchange dependent manufacturing sectors have not had a good experience over the past one year.

“Admittedly, segments of manufacturing with high levels of backward integration had lesser degrees of shocks from the forex illiquidity and exchange rate depreciation in the economy. The Cement and the Food and Beverage sub-sectors are notable examples.”

Also commenting, Director General, Manufacturers Association of Nigeria, MAN, Mr Segun Ajayi-Kadir, acknowledged that the economy seems to be recovering from the shocks of the COVID-19 pandemic, but cautioned that other operating challenges remain in the economy.

He asserted that there is no recorded high level of economic activities in the sector to justify such a growth rate in the quarter reported by NBS.

Ajayi-Kadir stated: “It is clear that within the greater part of 2020 when COVID-19 pandemic and the associated challenges were at the peak, only a few sectors of the economy operated.

 The Food, Beverage & Tobacco and Chemical & Pharmaceutical sectors operated with minor interruption in the period due to their essentialities. These sectors were quickly joined by the Cement and Basic Metal and Iron & Steel sectors in the last two quarters of 2020 after the full opening of the economy.

In Q4’20, economic activities returned in the manufacturing sector principally due to seasonal/festive consideration.

“In Q1’21, manufacturing activities, more or less, rebounded to the level of pre-COVID-19 period. So, it  is expected that the sector will present better performance in Q1’21 than what obtained in Q4’20.   Particularly the Food, Beverage & Tobacco and Chemical & Pharmaceutical sectors are expected to post higher growths due to the relatively higher capacities utilization they enjoyed since 2020.

“In addition, it is not out of place for the Cement and Basic Metal, Iron and steel sector to present high growths in Q1’21 due to the increased level of construction work going on in different parts of the country backed by government spending across the country.

“These results were largely corroborated by the MAN’s Manufacturers CEOs Confidence Index (MCCI) of Q1’21, a quarterly survey of the manufacturing sector. 

The index  showed improvement in the confidence of manufacturers in  a good number of  manufacturing sectoral groups.

“However, the reported 3.4 percent growth rate of the manufacturing sector in Q1’21 came as a surprise given the numerous challenges facing the sector.

 We are currently experiencing  rising cost of manufacturing inputs. So it is surprising to see a rate higher than the  rate of 0.81 percent in Q1’19 and 0.43 percent of Q1’20 which were relatively stable periods.

“Incidentally, there is no recorded high level of economic activities in the sector that would justify such a growth rate in the quarter.   Even the aggregate MCCI which increased to 49.1 points in Q1’21 from 42.1 points in Q4’20 was still below the 50 neutral base points, which indicated that manufacturers only have a little more confidence in the economy.”

NBS data

NBS in its Q1’21 GDP Report said Nigeria’s GDP grew by 0.51% (year-on-year) in real terms in Q1’21 and noted that the manufacturing sector grew by 3.4 percent, expanding for the first time since last year.

The positive growth in the manufacturing sector follows three consecutive quarters of decline recorded in  Q2’20 at -8.78%; Q3’20 at -1.51%; and Q4’20 at -1.51%. It is also higher than the 0.43% recorded in Q1 2020.

The NBS report stated: “Nominal GDP growth of the Manufacturing sector in the first quarter of 2021 was recorded at 32.10% (year-on-year), 3.62% points higher than recorded in the corresponding period of 2020 (28.47%) and 7.50% points higher than the preceding quarter figure of 24.60%. Quarter-on-quarter growth of the sector was recorded at 9.03%.

“The contribution of Manufacturing to Nominal GDP in the first quarter of 2021 was 15.27%, which was also higher than the corresponding period of 2020 at 12.98% and the fourth quarter of 2020 at 12.87%.

“Real GDP growth in the manufacturing sector in the first quarter of 2021 was 3.40% (year on year), higher than the same quarter of 2020 and the preceding quarter by 2.97% points and 4.92% points respectively. The growth rate of the sector on a quarter-on-quarter basis stood at -0.66%.

“Real contribution to GDP was 9.93%, higher than the 9.65% recorded in the first quarter of 2020 and 8.60% recorded in the fourth quarter 2020.”

The report indicated that the greatest contributors to the growth in the manufacturing sector include the Cement sub sector which grew by 11.20% in Q1 2021 from 6.59% in Q4 2020 and 1.67% in Q1 2020; Food, Beverage and Tobacco up 7.11% in Q1 2021 from 2.15% in Q4 2020 and 1.10% in Q1 2020. Others are   Non-Metallic Products grew by 2.88% in Q1 2021 from – 9.92% in Q4 2020 and -1.35% in Q1 2020; Chemical and Pharmaceutical Products grew by 3.91% in Q1 2021 from -0.78% in Q4 2020 and 0.58% in Q1 2020; Other Manufacturing which grew by 3.75% in Q1 2021 from -4.26% in Q4 2020 and -1.78% in Q1 2020; and Motor vehicles & Assembly grew by 3.29% in Q1 2021 from 2.02% in Q4 2020 and 1.04% in Q1 2020.

The Electrical and Electronics sub sector also expanded, having contracted by -4.46% in Q1 2021 as against -12.14% recorded in Q4 2020 and -1.59% in Q1 2020.

NBS categorises the Manufacturing sector under 13 activities: Oil Refining; Cement; Food, Beverages and Tobacco; Textile, Apparel, and Footwear; Wood and Wood products; Pulp Paper and Paper products; Chemical and Pharmaceutical products; Non-metallic Products, Plastic and Rubber products; Electrical and Electronic, Basic Metal and Iron and Steel; Motor Vehicles and Assembly; and Other Manufacturing.