Q4-18 GDP: Oil Sector Caps Nigeria’s Growth Fortune

February 12, 2019/Cordros Report

Earlier on Tuesday, the Nigerian Bureau of Statistics (NBS) reported that real GDP growth expanded by 2.38% y/y in Q4-18 – the seventh consecutive positive reading –, thereby driving Nigeria’s output growth over 2018FY to 1.92% (2017FY: 0.82%). Extending the pattern from the prior quarter, we noted that the improved growth story owed much to the sharp jump in non-oil GDP (+2.70% y/y), which largely masked the lingering contraction in the Oil GDP (-1.62% y/y), as oil production continues to suffer relative to the corresponding period of last year.
 
On the non-oil leg, where growth is at the highest level in 13 quarters, our attribution analysis showed that the sturdy performance largely stemmed from positive outturn across all components, with the Services (+3.76% y/y) sector leading the pack, followed closely by Agriculture (+2.60% y/y), Manufacturing (+1.50% y/y), Trade (+0.75% y/y), and Construction (+3.20% y/y) sectors.
 
Looking ahead, we framed our outlook for 2019 by taking into consideration, the impact of politics ahead of the general elections. In addition, we also answer the burning question of a possible resurgence of security challenges in the Niger-Delta region, and its risk on crude oil pipeline attacks, which could dampen oil production and thus, oil earnings. We estimate oil production to average 2.05mb/d (2018 average: 1.93mb/d), translating to 2019FY oil GDP growth of +5.8% y/y.
 
For non-oil GDP, we see room for faster growth in the agriculture sector on account of reduced security crises across the food producing areas. Elsewhere, we look for strong services GDP, driven by the telecommunications sub-sector. For manufacturing GDP, we see a slightly improved consumer wallet – hinged new minimum wage implementation – driving improved volumes for sector players across agro-processing, and food and beverage segments. Overall, we project FY 2019 growth of 2.2% y/y for the non-oil component.
 
We now look for overall GDP growth of 2.54% y/y (FY 18: 1.92% y/y; FY 17: 0.82% y/y) in 2019.

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