Inflation erodes nearly N2tr from telecom gains that contribute to GDP
By Jeph Ajobaju, Chief Copy Editor
Telecom growth is under threat with inflation threatening the gains of the sector that contribute significantly to Gross Domestic Product (GDP)
Inflation wiped out N1.94 trillion telecom gains, depressing the sum to N262.88 billion, in the first quarter of 2023 (Q1 2023), a 636.85 per cent loss.
Information telecommunication technology (ICT) contributed N5.60 trillion to nominal GDP in Q1 2023, a 52.83 per cent year-on-year (YoY) growth from N3.67 trillion in Q1 2022.
But adjusted for inflation, the contribution amounted to only 11.71 per cent increase, with telecom real GDP contribution growing from N2.25 trillion in Q1 2022 to N2.51 trillion in Q1 2023.
Economists describe nominal GDP as the market value of goods and services produced at a particular period while real GDP is got after inflation is factored into nominal GDP. Real GDP is the true reflection of the economic status of a country.
Headline inflation was 15.92 per cent in March 2022, according to the National Bureau of Statistics (NBS). I increased to 22.04 per cent in Q1 2023 on the back of a surge in the prices of food, electricity, gas, and more.
In Q1, 2023, Nigeria’s
Real GDP growth rate fell YoY from 3.11 per cent in Q1 2022 to 2.31 per cent in Q1 2023, which the NBS attributed to the adverse effects of the cash crunch sequel naira redesign policy of the Central Bank of Nigeria (CBN)
The services sector, of which telecoms is a subsector, drove the performance of GDP, with a growth of 4.35 per cent and contributed 57.29 per cent to aggregate GDP.
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Battling with double-digit inflation
Former Communications and Digital Economy Minister Isa Pantami confirmed ICT (composed largely of telecom activities) contributed thrice as much as oil and gas sector to GDP, per The PUNCH.
“For over 50 years,” he said, “Nigeria relied so much on oil and gas. But today, we have reached a situation where the contribution of ICT to our gross domestic product in Nigeria is almost three times the contribution of oil and gas to the country’s GDP.
“In the last three years, we have set up three unprecedented records with regard to ICT contributions to the GDP.”
Nigeria has been battling with double-digit inflation for some time.
The World Bank reiterated Nigeria had one of the highest inflation rates globally in 2022 and warned high inflation was hampering the country’s economic recovery, eroding the purchasing power of the most vulnerable households.
“If double-digit inflation persists during 2022-2023, rising prices will distort consumption, investment, and saving decisions of the government, households, and firms, with adverse ramifications for long-term borrowing and lending,” the World Bank added.
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