February 12, 2019/ARM Research
This morning, the National Bureau of Statistics released the Q4 2018 GDP numbers. From the details provided, the Nigerian economy grew by 2.4% YoY compared to Q3 18 growth of 1.8% YoY. Notably, the number was shy of our estimate of 2.7% YoY due to lower crude oil production of 1.91mbpd – with the oil sector contracting for the third time this year by 1.6% YoY – compared to our estimate of 2.01mbpd.
As a result, the growth picture over Q4 18 largely mirrored further improvement in the non-oil sector (+2.7% YoY). That said, over full year 2018, the Nigerian economy grew by 1.9% YoY, higher than the 0.8% growth reported for full year 2017 and 10bps lower than our estimate of 2.0%
Figure 1: Growth in Real GDP, Oil and Non-Oil GDP
Source: NBS, ARM Research
Non-Oil Sector Holds The Fort
Similar to the trend observed in the last two quarters, non-oil sector remained the focal point for economic expansion, growing 2.7% YoY in Q4 18 (Q3 18: 2.3% YoY). The numbers revealed improvement across all the sub-sectors, with Services and Agric leading the pack. Looking at breakdown of the former, output in the services sector expanded by 3.8% YoY, stemming from improvement in information and communications technology (+13.2% YoY) and support from activities in the transport segment (+9.5% YoY). For clarity, the Nigerian Communications Communication revealed that active subscribers, our proxy for callable minutes, improved by 13.2% YoY while internet subscribers increased by 10.7% YoY in the review quarter. Elsewhere in the Agric space, production activities improved by 2.5% in Q4 18, higher than Q3 18 of 1.9% but slightly disappointing compared to our estimate of 3% and Q4 average of 3.8% over the last four years.
Furthermore, manufacturing sector grew by 2.4% YoY due to expansion in food production, oil refining and textile production. For us, we believe the improvement in food (+2.2% YoY) and textile (+1.2% YoY) production reflects continued FX availability and stability. Growth in oil refining however came as a surprise to us, up by 33.6% after posting two quarters of consecutive contraction. For context, Going by NNPC’s monthly report, capacity utilization at the country’s refineries still remain low, with October and November numbers lower than 1%, as they undergo a revamping exercise. Elsewhere activities in the trade and construction sectors further strengthened by 1.0% YoY and 2.0% YoY respectively.
To Our Surprise, Oil Production Falls Again
Output in the oil sector contracted by 1.6% over Q4 18, to record the third consecutive quarter of negative performance this year. For context, average crude oil production printed at 1.91mbpd (vs. 1.96mbpd in Q4 17) during the review period, a further decline from 1.95mbpd reported in Q3 18. Notably, given that recent reports from NNPC and press releases by international oil companies suggest no leakages at major pipelines (Trans – forcados and Trans Ramos) over Q4 18, we would seek more clarity on the source of the lower crude oil production during the period.