Posted Sat, Aug 28, 2021 6:05 AM

NESG GDP Alert for the Second Quarter of 2021

How did the Nigerian Economy Perform in the Second Quarter of 2021?

According to data from the National Bureau of Statistics, Nigeria’s real Gross Domestic Product (GDP) grew by 5.01% to N16.7 trillion in the second quarter of 2021 (2021Q2), from N15.9 trillion in the second quarter of 2020. This represents the highest quarterly growth rate since 2014. It is also the third consecutive positive growth the economy has experienced, following the contraction of -3.6% in the third quarter of 2020.

Despite this high positive year-on-year growth of 5%, the economy, in 2021Q2, did not perform better when compared with the first quarter of 2021. In fact, real GDP declined by 0.8% on a quarter-on-quarter basis as real GDP value was N16.8 trillion in the first quarter of 2021 (2021Q2: N16.7 trillion) – see Figure 2. This implies that in actual terms, economic activities were on a downward trend and recovery is rather slow on a quarter-by-quarter basis. For the first half of 2021, real GDP grew by 2.7% relative to the first half of 2020.

Why Such a High Growth Rate of 5%?

The major reason for the high growth in the second quarter of 2021 was due to the lockdown and restrictions implemented in the second quarter of 2020 (particularly in the month of April) to limit the spread of COVID-19. The implementation of the lockdown and restrictions across major states in Nigeria meant that companies involved in the production of non-essential items/services could not produce output. Only companies and individuals involved in essential activities such as health care, agriculture, telecoms, etc were allowed to operate, hence, the GDP decline of -6.1% in the second quarter of 2020 (2020Q2). Because year-on-year GDP growth compares GDP output in two corresponding quarters due to the similarities in the nature of their economic activities (i.e., quarter 2 of 2020 vs quarter 2 of 2021), comparing a period with limited economic activities (2020Q2) with a period where lockdown rules have been relaxed (2021Q2) would result in such high growth. This is what is called the base period effect. After a major crisis or the unique and huge disruption caused by the COVID-19, a true measure of recovery would be tracking the progression of GDP on a quarter-on-quarter basis to determine whether economic activities are improving. Looking at Nigeria’s quarterly trend, real GDP value declined in the second quarter of 2021. This implies that economic players produced lesser outputs in April to June (valued at N16.69 trillion) when compared with the previous three months (N16.83 trillion)