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NIGERIA GROSS DOMESTIC PRODUCT - A better shot at recovery

Citing the recently released report by the National Bureau of Statistics (NBS), the Nigerian economy expanded by 5.01% y/y (Vetiva: 4.47% y/y) in Q2’21 on the back of the gradual reopening of the economy, the absence of stringent restrictions, and the reopening of the land borders. While this represents the strongest growth turnout in 7 years and the best since the pandemic struck, Nigeria is yet to recover from pandemic scars, as the 5.01% y/y outturn is underwhelming compared with the 6.10% y/y contraction experienced in Q2’20. Looking at the sectoral drivers of this performance, whilst the drawback in the oil sector (Q2’21: -12.65% y/y) is to blame, the 6.74% y/y rebound in the non-oil sector was a significant contributor as it trumped the 6.05% y/y contraction it experienced a year earlier.

On the back of CBN intervention efforts, agriculture could maintain its resilience, however, we expect security challenges and the dearth of technological advancement in the sector to limit the pace of growth. The industrial sector could witness stellar recovery from the easing of OPEC+ production cuts, sustained rebound in the manufacturing sector, and continued investment in real estate. However, we note headwinds from frequent production glitches, which could limit the pace of recovery in the oil sector. While the passage of the Petroleum Industry Act and the easing of OPEC+ cuts provides reason to cheer, the benefits may not be visible in the near term due to increased global attention to renewable energy and the infrastructure challenges, which has prevented the country from keeping up to its new production quota. The manufacturing sector could sustain its pace of expansion, driven by a pick-up in economic activities and healthy local demand. However, the reopening of the borders and weakness of the Naira may limit gains in the textile sub-sector.