Q1:2024 GDP Report | Macro-economic and Structural Issues Slow Economic Growth
From the recently released Nigeria’s Gross Domestic Product (GDP) report for Q1:2024, the National Bureau of Statistics (NBS) reported that the economy expanded by 2.98% YoY in the quarter, representing slower growth compared to Q4:2023 (+3.46% YoY). Notably, the Nigerian economy, amid several macroeconomic and structural issues, has consistently remained on the path of growth for fourteen (14) consecutive quarters, since Q2:2020. Growth in Q1:2024 was fueled by similar expansion in the oil (+5.70% YoY in Q1:2024 vs. +12.11% YoY in Q4:2023) and non-oil (+2.80% YoY in Q1:2024 vs. +3.07% YoY in Q4:2023) sectors. The moderated pace of growth in the sectoral performance can be attributed to inflationary pressures, exchange rate depreciation, high interest rates and continued oil theft, among other challenges that occurred during the quarter.
We remain optimistic that the Nigerian economy would remain resilient in Q2:2024. This is on the back of a low base effect from Q2:2023 (+2.51% YoY), which was driven majorly by a 13.43% YoY contraction in the Oil sector. Consequently, we expect growth in the Oil sector in Q2:2024, on the back of low base effect, in conjunction with improved investment in the sector and higher oil production stemming from NNPC’s recent partnership with NOSL Ltd. Furthermore, we expect that non-oil sector growth would continue to be fueled by the services sector, particularly the ICT sub-sector, albeit at a slower pace due to the lag effect of the 600bps hike in benchmark policy rate in Q1:2024. Overall, for Q2:2024, we project GDP growth rates at 3.00% for the base case, 2.30% for bear case and 3.50% for the bull case. While the International Monetary Fund (IMF) project a 3.3% YoY growth in 2024FY, we expect GDP growth rates at 2.71% for the base case, 2.09% for bear case and 3.24% for the bull case.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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