Nigeria’s non-oil economy grew 1.5 percent year on year (YOY) in the fourth quarter of 2017, its strongest performance since 2015, according to GDP data from the National Bureau of Statistics (NBS) released yesterday.
This is a reversal of the non oil sectors negative growth of -0.76 percent recorded in the third quarter of 2017 and more than twice the average growth rate recorded in the first and second quarter of 2017.
Overall economic growth for 2017 came in at 0.83 percent helped by an 8.68 percent growth in the oil sector. Even though the oil sector accounts for less than 10 percent of the country’s economic output, the non-oil sector remains highly dependent on the dollars earned from the sector which accounts for more than 90 percent of export revenue.
“The non-oil sector recovered from the contraction in the prior quarter with support stemming mainly from Agriculture. The growth reflects the main harvest season which was above average. For us, we perceive favorable weather, increased cultivated land and sustained focus of the FG on the sector via various support programs as key drivers for increased output during the quarter. Another support to the positive non-oil growth was trade, following five consecutive quarters of negative growth. The rebound in trade was on the back of increased dollar availability, with sector overall contribution increasing to 16.8% (Q3 17: 15.9%),” ARM Research analysts said.
Accelerated growth in Agriculture of 4.2 percent YOY versus 3.1 percent in Q3 2017, recovery in trade 2.1 percent YOY versus -1.7 percent in Q3 2017, and slower contraction in services of -0.8 percent YOY versus -3.1 percent in Q3 2017 largely drove the overall economic growth in Q4 2017.
But analysts have noted that the country’s GDP growth of 0.83 percent in 2017 remains low.
“The growth rate still lags far behind where Nigeria should be,” said Razia Khan, chief economist for Africa at Standard Chartered, although she noted that the full-year growth was higher than the 0.7 percent forecast by her bank.
Elsewhere, the services sector also saw a slower contraction of -0.3 percent (Q3 17: -1.1%) during the review period which stemmed from the ICT sector (Q4 17: -1.5%; Q3 17: -4.5%). Though data from the Nigerian Communications Commission revealed a downturn in industry voice calls (-7% YoY to 142 million active subscribers), mild growth in data services (YoY: 3% to 95 million subscribers) was able to tame its effect on the industry’s total output. Oil refining remained in negative territory, losing -46.2% YoY.
The Nigerian National Petroleum Corporation (NNPC) says it wants to raise the country’s refining capacity from the current nameplate capacity of 445,000 barrels per day (bpd) to 662,000 bpd, but this data indicates such plans are the blueprint for a pipedream.
According to data from its operations and financial report for November, the three refineries produced 55,187 metric tonnes (MT) of finished petroleum products and 39,562 MT of intermediate products out of 107,748 MT of crude processed at a combined capacity utilization of 5.92 percent compared to 17.63 percent combined capacity utilization achieved in the month of October 2017.
“A problem the NNPC will be confronted with is speed in getting approvals for funding to do repairs to increase efficiency of the assets, and if it can manage the repairs,” said Chuks Nwani, an energy lawyer.
Faster growth in food, beverage and tobacco and Textile, Apparel and Footwear erved as pillars in pushing the manufacturing sector back to a positive growth of +0.1 percent (Q3 17: -2.9%).
“Consistent with the above-50 readings in PMI releases over H2 2017, the manufacturing sector expanded 1% y/y driven by gains in the key sub-sectors: food, beverage and tobacco (up 2.2% y/y) and textiles, apparel and footwear (up 1.6% y/y) alongside a return to growth across most industries which helped offset continued weakness in refining (down 47% y/y) and cement (down 1.6% y/y). The improvements reflect an improved FX liquidity profile and a recovery in consumer demand as PMI readings in Q4 2017 showed higher new orders, growing inventory and rising employment,” said Ecobank research analysts in a Feb. 27 note to clients.
“Looking ahead, the stronger non-oil growth reading lifts our optimism regarding Nigeria’s economic growth prospects over 2018. We now see telecommunications GDP exiting recession in Q1 2018 given the strength of the quarterly recovery over Q4 17 even as a more accommodative monetary policy stance and improved FX liquidity buoys activity in the manufacturing and trade sectors. In addition, improvements in fiscal revenue at both federal and state level are likely to allow for further gains in the construction and cement sectors. For oil GDP, we expect oil production to average 2.11mbpd (2017e: 1.88mbpd) helped by continued peace in the Niger Delta and likely on-streaming of the 250kbpd Egina oil field in Q3 2018. In all we look for real GDP growth of 3% in 2018 up from our prior forecasts for 2.6% growth.”
ISAAC ANYAOGU & ENDURANCE OKAFOR, Lagos, ONYINYE NWACHUKWU, ABUJA
