Nigeria records best economic performance post recession

On Tuesday 12th of February 2019, Nigeria’s National Bureau of Statistics (NBS) released the GDP figure for the fourth quarter (Q4) of 2018 and full year 2018. According to the report, Nigeria’s economic growth grew by 2.38 percent in Q4 2018 which is a 0.27 percent increase from the figure of Q4 in 2017 and a 0.55 percent increase from the Q3 figure.

The report also revealed that Nigeria’s GDP grew at an annual growth rate of 1.93 percent in 2018, compared to 0.82 percent recorded in 2017 representing Nigeria’s best performance since the 2016 recession. This growth occurred despite the drop in the global prices of oil.

According to research, Nigeria’s highest Gross Domestic Product (GDP) growth rate remains 14.6 percent, which was recorded in 2006.

How the oil and non-oil sector fared in the first quarter of 2017?

According to NBS, the non-oil sector contributed 92.9 percent to the growth of the GDP as opposed to the oil sector, which contributed 7.06 percent.

The oil sector:

In Q4 2018, the average daily oil production stood at 1.91 million barrels per day (mbpd). This was lower than the 1.95 mbpd recorded in the same quarter of 2017, and 1.94mbpd in Q3 2018.

The oil sector recorded a real GDP growth rate of –1.62 percent (year-on-year) in Q4 2018, indicating a –12.81 percent decline relative to the growth rate recorded in the corresponding quarter of 2017.  

On an annual basis, real GDP growth for the oil sector stood at 1.14 percent as against 4.69 percent recorded in 2017. The Oil sector contributed 7.06 percent to real GDP in Q4 2018, down from figures recorded in the corresponding period of 2017 and the preceding quarter, where it contributed 7.35 percent and 9.38 percent respectively.  

The non-oil sector:

The non-oil sector grew by 2.70 percent in Q4 2018. This is 1.25 percent points higher than the growth rate recorded in Q4 2017, and 0.38 percent points higher than the growth rate recorded in Q3 2018. On an annual basis, the non-oil sector recorded a growth rate of 2 percent in 2018, performing better than 0.47 percent seen in 2017.

The key performing activities in the sector during Q4 were Information and communication, Transportation & Storage, Arts & Entertainment, Agriculture and Manufacturing.

The Non-Oil sector contributed 92.94 percent to GDP in the fourth quarter of 2018, which is slightly higher than the 92.65 percent seen in Q4 2017. However, the annual contribution for 2018 stood at 91.40 percent as against 91.33 percent recorded in 2017. The key performing activities on an annual basis include Transport, Information & Communication, Electricity, Water, as well as Arts & Entertainment.

In both Q4 and 2018 Transport, Information & Communication, Arts & Entertainment were the major contributors to the non-oil sector.

A look at how some key sectors fared in 2018

Agriculture

The Agriculture sector is made up of four sub-activities: crop production, livestock, forestry and fishing with crop production being the largest contributor to the sector with 89.84 percent of nominal agriculture GDP. The sector grew by 14.27 percent in 2018 which is higher than 11.29 percent recorded in 2017. In nominal terms (without taking inflation into account), the sector grew by 18.58 percent year-on-year.

Mining and Quarrying

The Mining and Quarrying sector has four sub-activities, which are crude petroleum and natural gas, coal mining, metal ore and quarrying and other minerals. In nominal terms, the sector contributed 10.70 percent of nominal GDP in 2018, compared with 9.22 percent in 2017. The sector contributed 8.74 percent to total real GDP in 2018.

Manufacturing

There are thirteen activities in Nigeria’s Manufacturing sector, which include: oil refining, cement, food, beverages, tobacco, textile, apparel, footwear, wood and wood products, pulp paper and paper products, chemical and pharmaceutical products, nonmetallic products, plastic and rubber products, electrical and electronic, basic metal and iron and steel and motor vehicles and assembly.

NBS revealed that for 2018, the manufacturing sector the sector contributed 9.75 percent to total nominal GDP, higher than its contribution, of 8.83 percent in 2017 while the annual growth rate was 2.09 percent in 2018. The annual growth rate was a significant improvement over the previous year’s growth rate of –0.21 percent.

Finance and Insurance

The Finance and Insurance Sector consists of two subsectors: financial institutions and insurance firms. Financial institutions account for 88.74 percent of the sector and insurance firms account for 11.26 percent of the sector. In nominal terms, the sector grew by 1.54 percent with Financial Institutions growing slower at 1.16 percent than Insurance which is growing at 4.63 percent. The total nominal GDP growth for 2018 was recorded at 4.20 percent as against 6.75 percent in 2017.

What does this mean for Nigeria

The data released four days to the presidential election, reveals that Nigeria is still overly dependent on oil as its source for revenue despite several efforts in diversifying its economy. In spite of the notable improvements in GDP, economic growth still remains weak in Nigeria, with growth averaging under 2.5 percent which is comparable to the rate of population growth over the next five years. Inflation in the country, especially of food prices, remains high. There is also a high rate of unemployment and insecurity in the country.

According to a recent report by Brookings, unless policymakers implement significant reforms to reduce dependence on oil economies like Nigeria remain at risk of a lost decade (flat per capita GDP). The IMF also warned that to diversify its economy in order to boost revenue which will help unlock private credit and improve corporate performance.