By Niyi Jacobs, Editor
Consumption expenditure is an important factor in determining economic growth for any country. Nigeria recorded its worst quarterly consumption expenditure in the second quarter of 2020.
This was due to the effect of the Covid-19 pandemic on the Nigerian economy, which eventually led to a second recession in 5 years as Nigeria’s real GDP contracted by 6.1% and 3.62% in Q2 and Q3 2020 respectively.
It is, however, important to note that Nigeria recovered from the Covid-induced recession in the fourth quarter of the year as the real GDP expanded by 0.11% in Q4 2020.
In the third and fourth quarters of 2020, real exports declined by 42.05% and 57.79%, year on year, resulting in an annual growth rate of -26.96% in 2020. However, on a quarter on quarter basis, real exports remained negative from Q1 2020 to Q4 2020.
Due to declining rates of growth in exports and imports in 2020, the growth in the net balance of trade (or net exports) was negative in Q3 and Q4 2020. On a year-on-year basis, the net trade balance declined by 52.39% in real terms in Q3 and also dipped by 72.61% in Q4.
According to the report, Nigeria’s household consumption rose by 16.59% in Q4 2020 to stand at N13.92 trillion, compared to N11.94 trillion recorded in the corresponding quarter of 2019. It also represents a 20.76% increase compared to N11.52 trillion recorded in the preceding quarter.
Household consumption expenditure in Q3 and Q4 2020 grew by 6.1% and 16.59% year-on-year in real terms. The annual growth rate in real household consumption expenditure stood at 0.81% as against a decline of 1.06% recorded in 2019.
Government consumption expenditure recorded growth rates of 99.18% and 12.13% in Q3 and Q4 2020 respectively, while the annual growth rate stood at 61.58% in 2020 compared to 8.78% recorded in 2019.
Although Net Exports recorded positive growth rates in the first two quarters of 2020 but turned negative in the third and fourth quarters of 2020. It dipped by 52.39% and 72.61% in Q3 and Q4 2020 respectively.
By annual consideration, net export declined by 29.55% in 2020 as against a growth of 7.64% recorded in the previous year.
However, national disposable income grew by 4.44% in the third quarter of 2020 and 3.13% in the fourth quarter of the year, while a 3.34% growth was recorded as the annual growth compared to 0.35% growth recorded in 2019.
Compensation of employees, dipped by 2.32% in Q3 2020, before recording an increase of 6.36% in the fourth quarter of the year. The decline in the third quarter could be largely attributed to the downturn caused by the covid-19 pandemic, forcing many organisations in the country to either downsize their staff strength or embark on a pay cut.
The Nigerian economy expanded marginally by 0.11% in Q4 2020. It, however, contracted by 1.92% in 2020 to stand at N70.14 trillion in real terms.
The final consumption expenditure of households in Nigeria stood at N42.81 trillion in 2020. Individual consumption expenditure for general government stood at N1.68 trillion while collective consumption stood at N4.98 trillion in the same period.