2017: Tourism’s Direct Contribution to Nigeria’s GDP Yet to Rise in 4th Quarter as Forecas

Posted by Kola Kayode
October 30, 2017

Self-Published

At the beginning of this year (2017), Nigeria was deeply soaked in the dirty waters of recession occasioned by the fall in Naira value, dwindling prices of petroleum products and of course, corruption. The country’s economy was held hostage as it were. Everyone felt the pang of distress – including the unborn babies, as many mothers stayed on pregnancy prevention pills to prevent delivering newborns into such a pathetic state of distress.

Eventually, the pains eased out but not without teaching us a vital lesson: complete reliance on oil as our only export will continue to plunge the economy and everything else that hinges on it into destruction; hence, the need to diversify. The recession continued to tiptoe into the 4th quarter of the year before we were dimly bailed out of the unfriendly situation. And gradually, things started picking up, albeit slowly.

Meanwhile, you’d recall that experts across a plethora of disciplines offered suggestions on how the government can pull the economy out of recession through diversification. Many of these recommendations tilted towards developing other sectors that have potential for growth – sectors that had long been abandoned or relegated because they were perceived to lack the capacity to be as buoyant as the oil sector. Such sectors included Agriculture, Hospitality & Tourism, SMEs, etc. So the government started adopting some of these recommendations.

The Ministry of Information and Culture, led by Alh. Lai Mohammed swung into action by developing a blueprint on how government can invest in the tourism sector to boost its growth. The minister was pregnant with many viable ideas. Consequently, be orchestrated several partnerships with independent tourism bodies with the aim of turning the sector into a revenue generating business. One of those partnerships included the world apex tourism body, United Nations World Tourism Organisation (UNWTO) providing capacity development for Nigerian tourism personnel on how to grow the sector into something viable.

While the world is waiting for these laudable efforts to yield bountiful results which of course would take some time, it is important to take a retrospective look at some of the interesting predictions of the World Travel & Tourism Council (WTTC) in 2016 about what the direct & total contributions of Travel & Tourism to the country’s GDP would be by end of 2017. But first, let us attempt to explain the difference between Direct and Total contributions as used in the report.

Direct contribution of Travel & Tourism to GDP reflects the ‘internal’ spending on Travel & Tourism (total spending within a particular country on Travel & Tourism by residents and non-residents for business and leisure purposes) as well as government ‘individual’ spending – spending by government on Travel & Tourism services directly linked to visitors, such as cultural (e.g. museums) or recreational (e.g. national parks). The direct contribution of Travel & Tourism to GDP is calculated to be consistent with the output, as expressed in National Accounting of tourism-characteristic sectors such as hotels, airlines, airports, travel agents and leisure and recreation services that deal directly with tourists. The direct contribution of Travel & Tourism to GDP is calculated from total internal spending by ‘netting out’ the purchases made by the different tourism sectors.

On the other hand, the total contribution of Travel & Tourism includes its ‘wider impacts’ (i.e. the indirect and induced impacts) on the economy. The ‘indirect’ contribution includes the GDP and jobs supported by: Travel & Tourism investment spending – an important aspect of both current and future activity that includes investment activity such as the purchase of new aircraft and construction of new hotels; government ‘collective’ spending, which helps Travel & Tourism activity in many different ways as it is made on behalf of the ‘community at large’ – e.g. tourism marketing and promotion, aviation, administration, security services, resort area security services, resort area sanitation services, etc; domestic purchases of goods and services by the sectors dealing directly with tourists – including, for example, purchases of food and cleaning services by hotels, of fuel and catering services by airlines, and IT services by travel agents.

As at 2016, direct contribution of Travel & Tourism to GDP was NGN1,861.4bn (1.7% of GDP) but this was forecast to rise by 1.1% to NGN1,881.1bn in 2017. But the figures presented in the WTTC 2017 report are proof that not so much contribution from the sector has reflected on the economy. In the last 10 months, no significant direct contribution from Travel & Tourism to the country’s GDP. For instance, its contribution to the whole economy GDP still remains at 1.7%, same as it was in 2016. A review of tourism’s impact on the country’s GDP in the last 10 years (2007 – 2017) shows that its impact was at all time high in 2008, having contributed 2.4% to the GDP. Since 2008, its impact has been fluctuating between 1.8% and 1.5%.

Travel & Tourism directly generated 649,500 jobs directly in 2016 (1.6% of total employment) and this was forecast to grow to 671,500 jobs in 2017 (3.4% of total employment). Whereas total contribution to employment (including wider effects from investment, the supply chain and induced income impacts) was 1,793,000 jobs in 2016 (4.5% of total employment) and was forecast to generate 1,818,500 jobs in 2017 (4.3% of total employment). But what percentage of employment has been generated so far in 2017? The recent report shows that only 1.7 million jobs have been generated. This although falls short of the forecast but not far-fetch.

Visitor exports are a key component of the direct contribution of Travel & Tourism. In 2016, Nigeria generated NGN211.3bn in visitor exports. In 2017, this was expected to fall by 2.8%, and the country was expected to attract 733,000 international tourist arrivals. Travel & Tourism was expected to attracted capital investment of NGN1,129.4bn in 2016. This was expected to fall by 5.0% in 2017, and rise by 5.4% pa over the next ten years to NGN1,821.5bn in 2027.

Leisure travel spending (inbound and domestic) generated 54.1% of direct Travel & Tourism GDP in 2016 (NGN1,668.7bn) compared with 45.9% for business travel spending (NGN1,417.1bn). Leisure travel spending was expected to grow by 0.4% in 2017 to NGN1,675.8bn. Domestic travel spending generated 93.2% of direct Travel & Tourism GDP in 2016 compared with 6.8% for visitor exports (i.e. foreign visitor spending or international tourism receipts). Domestic travel spending was expected to grow by 1.4% in 2017 to NGN2,913.9bn. Visitor exports were expected to fall by 2.8% in 2017 to NGN205.4bn.

It might be too early to draw a conclusion on Travel & tourism’s performance in 2017 considering there are about 14 weeks left before the end of the year. By January 2018, we will conduct a fresh analysis when the Jumia Travel Hospitality report is published.

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