FREE

Nigeria FY'16 GDP: Q4 Contraction Caps 2016 Recession

• The release of Nigeria’s Q4’16 Gross Domestic Product (GDP) figures – showing a 1.3% year-on-year (y/y) contraction in the period – wrapped up a year in which the country recorded its first full-year recession in 25 years. Whilst Q4 numbers were an improvement on previous quarters’, full-year real GDP growth amounted to -1.5% (2015: 2.8%) with the malaise present in both oil (-13.7%) and non-oil (-0.2%) sectors in 2016. Already reeling from the oil price slump since mid-2014, the economy was further buffeted by a number of negative economic factors during the year. These include currency weakness & dollar scarcity, depressed consumer demand amidst an inflationary environment, and unexpectedly lower oil production. Nigeria’s descent into recession can be pinned to the confluence of these variables, and they, in turn, hold the key to economic recovery.
• Oil sector performance is key for 2017. Beyond growth in the sector itself, improvement in oil price and volumes will have a knock-on effect on the wider economy. Our base scenario assumes continued strong oil prices and volumes – relative to 2016 – which should prop up growth given the low base of the precious year. We forecast FY’17 real GDP growth of 1.9%. Although we foresee a step forward in recovery in 2017, we expect Q1’17 real GDP growth to be negative (-0.7%) as economic weakness persists slightly at the start of the year (January Manufacturing PMI: 48.2) and the slightly higher base of Q1’16 takes its toll. We see growth picking pace in Q2’17, largely diven by recovery in oil sector.