Amidst dwindling fortunes of businesses in Nigeria over harsh operating environment and new high tax regimes, Nigeria’s economic growth strengthened in Q4-2019, driven by sharper than expected growth in non-oil GDP.
According to the National Bureau of Statistics (NBS), GDP grew by 2.55% y/y (vs. 2.28% y/y in Q3-19), the highest quarterly figure since Q3-2015, and higher than both Cordros’ Capital and Bloomberg consensus estimates of 2.36% and 2.20%, respectively. For 2019FY, the economy expanded by 2.27% y/y (vs. 1.19% y/y in 2018FY).
Besides, the growth also rose beyound projections of both the Wrold bank and IMF plus other growth trajectory setting agencies
According to the breakdown, the non-oil sector continued to show resilience, expanding by 2.26%y/y (vs. 1.85% y/y in Q3-19), with faster growth recorded across all sub-components, save for Trade which remained in recession. For clarity, the Services GDP (+4.01% y/y) led the pack, followed by the Agriculture (+2.31% y/y), and Manufacturing (+1.24% y/y) sectors.
The oil sector also expanded, albeit at a slower pace of 6.36% y/y (vs. 6.49% y/y in Q3-19) on lower crude production (+4.71% y/y vs Q3-19: 5.15% y/y), with the NBS estimating production during the three-month period to be 2.00mb/d (vs. 2.03 mb/d in Q3-19).
However, Cordros Securities Group is of the view that favourable base effect will continues to support oil GDP growth, recalling that “In our 2019FY outlook, we had argued that the Oil sector will sustain the growth momentum witnessed in Q3-19, albeit at a slower pace as the favourable base effect dissipated. True our prognosis, Oil GDP recorded a slower growth of 6.36% y/y (vs. +6.49 y/y in Q3-19), on account of the moderation in crude Oil production (+4.71% y/y vs. +5.25% y/y in Q3-19).
The group also noted further that the Non-Oil Sector Remains Resilient as “The Non-Oil sector (2.26%y/y vs. 1.85% y/y in Q3-19) surprised positively, as a sharper expansion in the Services GDP (4.01% y/y) and faster than projected growth in the Manufacturing GDP (+1.24% y/y) had a positive pass-through impact on the sector. Also, the Agriculture sector grew by 2.31% y/y.
From the foregoing, general analysts view is that slower growth projection for Q1 2020, “For Q1-20, we project a marginal growth in the Oil sector, on account of; (1) high base from the corresponding period in the prior year and (2) our expectation of compliance with OPEC’s production allocation to Nigeria. Nevertheless, we project crude Oil production inclusive of condensates at 2.03mb/d, which translates to a growth estimate of 0.78% y/y.
“For the Non-Oil sector, we expect growth to remain positive, albeit at a slower pace of 2.10% y/y. In summary, having modelled our expectation across both the Oil and Non-Oil GDP, factoring upside and downside risks, we project growth of 2.10% y/y for Q1-2020.
