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NIGERIA GROSS DOMESTIC PRODUCT - GDP expands by 2.51% y/y, oil sector lags

In Q2’23, Nigeria’s real GDP growth slowed to 2.51% y/y, 22bps lower than our estimate (Vetiva: 2.73% y/y) and 103bps lower than the Q2’22 outcome (3.54% y/y). We attribute this outcome to the normalization of post-COVID economic activities and a sustained relapse in the oil sector. While the agricultural sector expanded at a faster pace, growth in the services sector slowed, and the industrial sector contracted.

Industrials: Oil contraction weighs on growth outcome The oil sector remained in a recession for 13 consecutive quarters. Oil production fell to 1.22 million barrels per day in Q2’23 (Q1’23: 1.51 mb/d). This relapse is attributed to an ExxonMobil workers’ strike in April and sustained crude theft in the succeeding months. As a result, the oil sector contracted by 13.43% y/y (Q2’22: -11.77% y/y). We also witnessed slight moderations in the growth of the manufacturing sector, Water Supply & Waste Management, and Construction sectors. The Manufacturing sector grew by 2.20% y/y in Q2’23 (Q2’22: 3.00% y/y), induced by slower expansion in the food, beverages, and tobacco sub-sector (Q2’23: 4.33% y/y), cement sub-sector (Q2’23: 3.34% y/y), and a steeper decline in the textile sub-sector (Q2’23: -4.38% y/y).

Outlook: Growth could print higher in Q3 amid favourable base effects Despite the pipeline surveillance contract, the upstream sector could remain in a recession due to crude theft. We note that although oil production fell to 1.29 mb/d in July 2023, this is still slightly above Q3’22 average of 1.21 mb/d. Barring a deeper oil sector relapse, overall growth could remain above 2.5% in Q2. In the downstream sector, the take-off date for domestic refining of crude has been extended by two years. Thus, we revert to a no-refinery scenario.