The National Bureau of Statistics (NBS) has now delivered the national accounts on an output basis in the new series from 2010 through to 2013 (annual and quarterly), with the bonus last week of the data for Q1 2014. For whatever reasons, the process became highly extended. Yet the bureau, backed by the external agencies which provided technical support, is to be congratulated for producing a revealing snapshot of the Nigerian economy as at 2010. Nigeria had a US$503bn economy last year, comfortably the largest in Africa.
The headline favoured in most analysis was the reduction of two percentage points in average real growth for 2011 to 2013, to 5.0% from 7.0% in the old series. On closer scrutiny a familiar pattern emerges of a non-oil economy which is flying and its oil counterpart in contraction. Growth in the non-oil economy has averaged 10.1% y/y over the past eight quarters, compared with 8.0% over the past eight available in the old series (through to Q3 2013). In contrast, the oil sector has contracted by an average of -8.6% on the same basis, compared with -0.8%.
The story of the frontier market in expansion mode on the platform of resilient household demand remains intact. Indeed, it has been reinforced by the new series. The story underpins offshore equity investment in the NSE and, combined with the positive demographics, should dilute any “flight to quality” in the tightening of monetary policy in the US and elsewhere. Rising tensions between Russia and the US support this point. The rationale for investment to meet the demand of the emerging middle class for goods and services remains as strong as ever.
We now have a recognisable economic structure. The largest sector in 2013 was crop production (20.7% of constant price GDP), and the second largest was retail and wholesale trade (16.4%). The share of crude petroleum and natural gas has fallen to 11.1%, followed by manufacturing (9.2%), telecoms (8.5%) and real estate (7.7%).
This latest snapshot of the economy shows some new sectors. The work of the NBS has reduced the category of miscellaneous others to 2.5% of constant price GDP in 2013, compared with 6.6% in 2012 in the old series. Manufacturing is now divided into 13 separate segments, some of which overlap with investible counters on the NSE such as cement, and food, beverages and tobacco.
In terms of new sectors, we note additions in the public and private sectors. On the public side we see administration (2.9% of constant price GDP) and education (2.0%). On the private side, much was said about the Nollywood effect before the provisional data releases on an annual basis in April. There appears to have been a little industry hype although the data still show a 1.0% share for motion pictures, sound recording and music production, and a 1,2% share for broadcasting.
Growth trends in Q1 2014 also tell a very different story. Historically telecoms was the fastest growing sector with rates of around 30.0% y/y. This has slowed to 4.5% y/y in Q1, slower even that the 5.4% posted by crop production. Three new segments among the new total of 46 and two renamed achieved the most rapid growth: textiles, apparel and footwear with 34.5%, accommodation and food services (formerly hotels and restaurants) with 23.2%, construction (formerly together with building) with 17.9%, motion pictures with 19.1% and broadcasting with 11.3%.
The new data have thereafter confirmed the rude good health of the non-oil economy and updated our grasp of its most dynamic segments. Yet they have also highlighted the sorry condition of the hydrocarbons industry. We were surprised by the substantial downwards adjustment to both oil GDP and its annual rate of contraction. The NBS has not published its implicit price deflators, as it did with the old series, but we assume that the recalculated impact of inflation on the NATIONSsector was a factor.
We also recognize in the new figures the downward trend of crude oil production since H1 2012, at least on the basis of the series cited by the CBN and drawn from several sources. We cannot be more confident in this statement, given the absence of harmonized metering at the export terminals. The oil GDP data could shake policymakers out of their lethargy. New investment in the industry, as distinct from the purchase by local interests of onshore assets from the oil majors, has been low for several years.
The petroleum industry bill has now been six years in the National Assembly. A complicated piece of legislation and flawed in parts but it defies belief that the executive and legislature have been unable to shape the bill in such a way as to secure its passage. We referred to lethargy. In some circles it is a lack of information: we attended a briefing last week by the UK prime minister’s trade envoy for Nigeria (and Angola), and were rather surprised to hear about the growth in the oil industry.
The new data from the NBS give us an accurate photograph of the Nigerian economy as at 2010.The larger (non-oil) part of the cake is expanding rapidly, and we are able to identify many more slices than previously. The standard investor view of the market is again vindicated. The far smaller (oil) part of the cake is shrinking due to underinvestment and production “losses”. The best we can hope for is an acceleration of the reform programme including the industry after the elections due in February 2015.
