Q3 17 GDP: Oil Led Growth Mask Deceleration in Non-Oil


December 6, 2017//ARM Research

Nigeria’s economy grew by 1.4% YoY in Q3 2017, which is in sync with our estimate of 1.1%. Much of the growth came through a sustained boom in the oil sector which grew by 25.9% YoY on the back of higher oil production to 2.03mbpd (+8.9% YoY). 

Also, Agriculture sector sustained its resilience for the 8th consecutive quarter, recording a growth of 3.06% YoY to help moderate the weak numbers from the non-oil leg. However, not all data in this release was positive. 

Aside from Agriculture, other notable sub-sectors in the non-oil segment recorded deceleration in the review quarter. Consequently, non-oil GDP decelerated by 0.76% YoY, after two consecutive quarters of growth. 

The services sector, the largest component of the non-oil GDP sustained its decline for the second consecutive quarter ( -2.7% YoY) on the backdrop of a slowdown in the 1CT subsector (- 4.5%) which continues to reflect the deceleration in active subscribers (-8.2% YoY to 139 million). Real estate sub-sector also contracted by 4.1%. 

Elsewhere, the manufacturing sector declined for the first time this year by 2.9% YoY largely due to to 45% and 5% YoY deceleration in oil refining and cement even as Food, Beverage, & Tobacco, and Textile, Apparel & Footwear sub-segments recorded slower growth. 

Trade sector extended its contractionary trend since Q3 16 printing at -1.7% YoY. To put in perspective, the three sectors contributes a total of 63% to the non-oil segment. 

For the last quarter of 2017, we forecast crude oil production of 2.05mbpd (16.4% YoY) and thus estimate oil GDP growth of 48.1% YoY. On the non-oil leg, we forecast a 3.2% YoY growth in Agriculture on the back of the ongoing harvest season which is expected to boost crop production. 

On the other side, we estimate a 4.7% YoY contraction in Services underpinned by ICT and real estate. Given our view on lower voice calls, the largest contributor to ICT, we expect a further contraction in the third quarter on ICT even as slower activities in luxury real estate should sustain the deceleration in the real estate sector. 

Furthermore, supressed demand from 2015 levels and the high base from currency impact is expected to further depress Manufacturing and Trade sectors, a contraction of 1.8% and 2.8% accordingly. 

Consequently, we forecast non-oil GDP of -2.3% YoY. Tying our views on oil and non-oil guides to Q4 2017 GDP growth of 1.1% YoY which brings FY 2017 GDP to 0.5% YoY.