Policy measures undertaken by the federal government in the past few months would likely result in slower growth for the nation’s economy in the current year, the National Bureau of Statistics (NBS) has said.
The NBS, in a recent report, foresees slower gross domestic product (GDP) growth rate of 6.50 per cent compared to 7.36 per cent in 2011, a decline in value of total trade by 11.03 per cent compared with an increase of 47.87 per cent in 2011, as well as a rise of 13.57 per cent in inflation rate in the year 2012 as against 10.91 per cent in 2011.
The expected dismal performance of the economy, according to the NBS, is attributable to some of the federal government’s policies which include the import ban on certain food products that took effect in 2011 as well as the partial removal of fuel subsidy in January 2012.
The decline would also be due to anticipated drop in crude oil exports due to supply disruptions that occurred during 2011.
The NBS in its recent report entitled ‘‘Review of the Nigerian Economy in 2011 and Economic Outlook for 2012 – 2015’’ made public yesterday, however, said the economy would grow at a faster pace in 2013 as the effects of the partial repeal of the PMS subsidy dissipate. The economy is expected to grow more steadily at 7.43 per cent in 2014 and 7.25 per cent in 2015.
According to the report, lower economic growth in 2012 could be partially attributed to external shocks from existing growth concerns in the US, Euro-area, and China. Slower growth in these economies could also put downward pressure on the global demand for crude oil (and thus depress crude oil prices). Lower economic growth could also result from possible lower domestic crude oil production due to supply disruptions which have recently been on the increase.
Other threats facing the economy, the bureau noted, include inflationary pressures as well as the lingering effects of the partial (and likely eventual) removal of the subsidy on premium motor spirit (PMS) on household incomes.
“Nevertheless, we expect that a major driving factor behind the growth in the coming years will remain the non-oil sector that has been growing in leaps and bounds. Key underlying sectors will continue to be telecommunications, wholesale and retail trade, building and construction, and hotels and restaurants – which have exhibited double-digit growth over 2010 and 2011. Over the period, we find that the growth rate will actually decline towards the end of the forecast period. The growth rates obtained from the BVAR model for other projected years are 8.04 per cent in 2013; 7.43 per cent in 2014; and 7.25 per cent in 2015.”
On a nominal basis, GDP is expected to be valued at N42,631.71billion in 2012, an increase of 15.63 per cent from 2011. Nominal GPD is expected to increase over the forecast period by 17.28 per cent in 2013, 15.53 percent in 2014, and 14.19 per cent in 2015.
The report which also forecasts trends in inflation and value of trade for the country noted that inflation is projected to rise to 13.57 per cent due, to some extent, to the higher price levels in the economy following the partial removal of the PMS subsidy.
According to the report, inflationary pressures could have a dampening effect on GDP growth as a result of possible higher food prices around the country.
Particularly, it noted that inflationary pressures from imported food was another likely source of higher domestic food prices in 2012, since global food prices have been on a steady increase since last year. These, coupled with the partial removal of petrol subsidy, which has raised fuel prices in the country by almost 50 per cent would feed into the overall price level, further contributing to the inflationary pressures in the economy.
The NBS said it has evolved a new approach to forecasting by employing an econometric model to augment results from the traditional methods of surveys and its system of administrative statistics.
The report stressed that the moderation in price levels in 2011 could be partially attributed to the decisions by the CBN during the period.
The value of total trade for the country is expected to decline in by 11.03 per cent in 2012. This is expected to be partly due to the import ban on certain food products that took effect in 2011. The decline could also be due to a decline in crude oil exports possibly due to supply disruptions that occurred during 2011. Further out into the near term, the value of total trade is expected to rebound in 2013 to 11.25 per cent, followed by 20.6 per cent in 2014 and 16.44 per cent in 2015.
“While shocks in the early part of 2012 may have marginally slowed economic growth, the economy is expected to rebound in 2013 and grow at respectable trends in 2014 and 2015. The projected growth rates in this report may be further accelerated due to economic reforms expected to kick-in in the near future as the federal government is looking to reform key sectors such as agriculture and power, coupled with increased public (capital) expenditure; these are likely to put the economy on a higher growth path,” says the report.
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