Nigeria Strategy Report H2 2018 Excerpts - Growth to run above 2%, but nearing a cyclical peak
- We continue with our series of excerpts from our core strategy document – The Nigeria Strategy Report, but direct our focus towards a review of the performance of Gross Domestic Product over 3M 2018 and outline our view on the economic landscape for the rest of the year.
- Amidst improved activities in the oil sector and resilient growth in Agric, the Nigerian economy grew by 1.95% YoY in Q1 18 (Q4 17: 2.1% YoY). The reported numbers missed our estimate of 3.1% hinged on the surprising contraction in trade and construction sectors. Drilling to the sub components, oil sector growth (14.8% YoY) was a core component in driving growth, accounting for 64.5pps. On the non-oil leg, the Agric (3%), Manufacturing (3.4%), and Services (0.5%) sectors led the improved picture in the non-oil domain to drive a 0.8% growth YoY.
- Over 2018, contrary to the oil led growth seen in Q1 18 – we foresee the non-oil sector to be the major driver for growth over the rest of the year and thus revise our growth projection for 2018 to 2.1%. First off, we revise our oil sector growth to 5.8% (previously: 8.5% YoY) due to revised volumes for Q2 2018 to 1.89mbpd due to temporal closure of trans-forcados in May. On the non-oil leg, we now revise our forecast higher to 1.8% (previously: 1.3% YoY), hinged on development mainly in the Agric, Services and Manufacturing subsectors. Thus, given the rosy picture in the non-oil domain and its contribution[1] to overall economic activities – the Nigerian economy is set to ride on the wings of non-oil growth in 2018.
- From where we stand, the economic picture looks bleak in 2019 as growth is expected to slow relative to current year. First off, our expectation of crude production (2mbpd) sets a high base for oil sector growth in the coming year – leaving the non-oil as pioneer for 2019 growth. That said, as with prior year, we are majorly positive on Agric in the short term. Hence, with little support to the other non-oil sectors, growth in that territory would be slow. Given its contribution to overall economic growth, the year 2019 economic picture holds little promises relative to current year.
[1] Accounts for 90% of economic activities as at Q1 18
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