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Monday, July 4, 2022

Nigeria escapes full impact of Covid as Q1 GDP up 1.87%

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Nigeria’s first quarter (Q1) GDP rose by 1.87 percent compared to 2.55 percent growth recorded in the fourth quarter (Q4) of 2019.

Services and the Oil sector GDP posted growth of 3.5 percent and 5.1 percent year on year (YoY) respectively in Q1.

The Oil sector growth suggests crude oil production averaged 2.07mbpd in Q1 20, higher than average of 2.00mbpd in Q4 19 and 1.99mbpd in Q1 19.

Nigeria’s Q1 GDP figures released Monday morning decelerated less than analysts expected. On an attribution basis, the services sector contributed 1.3 percent to overall growth in Q1, followed by agriculture and crude oil of 0.5 percent each. Services and agriculture contribution to GDP improved to 38.3 percent and 22 percent from 37.7 percent and 21.9 percent in Q1 2019 respectively.

While the, headline GDP was not as bad as expected, the details of the report were less encouraging. Specifically, agriculture recorded the slowest Q1 growth of 2.2 percent YoY, compared to 3-year average Q1 growth of 3.2 percent YoY. Also, manufacturing growth over Q1 slowed to 0.4 percent YoY compared to 3-year average Q1 growth of 1.9 percent YoY. Elsewhere, retail & wholesale trades fell by 2.8 percent YoY, to recorded the sharpest contraction in more than 13 quarters. Although, the Q1 number was to some extent affected by COVID-19 related breakup in supply chains especially in the last month of the quarter, it is imperative to note that restrictions of movement and full shutdown did not come into effect until March 30. Accordingly, the likelihood is for a contraction in economic activity in Q2, with the risks tilted toward a worse-than-expected outcome.

The services sector largely dominated growth in the non-oil sector, followed by agriculture and construction.

In the services sector, growth decelerated 48bps to 3.5 percent YoY following solid outing in ICT (+7.6% YoY), financial services (+20.8% YoY) and transportation (+2.8% YoY). While the growth in the ICT emanated from increase in subscriber base by 8 percent YoY to 187 million as at February, the material growth in the financial services sector reflects the increase in credit creation by banks to meet up with the minimum loan to deposit ratio prescribed by the Central Bank of Nigeria. Elsewhere, while growth in the Agric sector slowed, it still contributed 0.5 percent to growth in the Non-oil sector.

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