Negative trade growth slows Nigeria’s Q1 2018 GDP to 1.95%
by BUNMI BAILEY & OLALEKAN IPELE
May 22, 2018 | 12:20 am| | | Start Conversation
First quarter 2018 GDP growth slowed by 0.16 percent to 1.95 percent, compared to 2.11 percent expansion recorded in Q4 2017, according to the National Bureau of Statistics (NBS) GDP report released yesterday, contrary to continuous quarterly growth expectation of analysts.
Analysts have attributed the decline to the fall in the contribution of the trade sector to GDP. The trade sector declined by -4.64 percent, falling from 2.07 percent in Q4 2017 to -2.57 percent in Q1 2018. Equally, the services sector growth fell by -0.57 percent from 0.10 percent in Q4 2017 to – 0.47 percent in Q1 2018.
BusinessDay analysis of the NBS report shows that GDP grew year-on year by 2.87 percentage points to 1.95 percent in Q1 2018 from -0.91 percent in Q1 2017 when the country was still in recession.
“Attention should be focused on the growth of the trade sector. It accounts for more than 50 percent of Nigeria’s total GDP. So long as this sector remains in the negative territory in terms of growth; our overall GDP growth is going to remain stunted. The sector’s contribution to GDP dropped from 2.07 percent in Q4 2017 to -2.57 percent in Q1 2018 which is why we have seen this slowed growth,” Ibrahim Tajudeem, Head of Research, Chapel hill Denham said on phone.
“The industrial sector, a sub sector of the manufacturing sector is doing very well, reflecting the priority of the monetary policy authorities to ensure that manufacturers have access to Foreign Exchange to import raw material for their production. However, traders are not feeling the recovery yet. Bear in mind the 41 items are still under ban. Traders do not manufacture, they likely just buy and sell.”
“The agricultural sector and the industrial sector grew by 3 percent and 6.86 percent respectively, had these growth rates been recorded by the trade sector, we would have seen a better GDP growth figure,” Tajudeem concluded.
Johnson Chukwu, CEO, Cowry asset management limited said that the slowing growth rate should be a major concern to the government and managers of the economy.
Despite the decline, analysts are optimistic about the prospects of the economy since this is the fourth quarterly consecutive positive expansion Africa’s largest economy is witnessing since exiting recession in Q1, 2017, driven by increased oil production and prices.
Further improvements in foreign exchange liquidity and a rebound in non-oil activity especially the manufacturing and agricultural sectors are also a contributing growth factor.
Ayodeji Ebo, MD, of Lagos-based financial advisory, Afrinvest said, “On a year on year basis, we expect the economy to be upward steady. We have seen continuous stability in FX market, good business environment, manufacturing companies are improving, Purchasing Managers’ Index (PMI) has been improving etc. so on the back of these we expect positive momentum in Q3 to Q4.”
Chukwu said that the economy will improve but depends on the stability of the political environment as the country nears pre-election activities in Q3 and the budget implementation.
Sector contribution to GDP is classed into the oil and non-oil sector. The Real growth of the oil sector increased by 30.37 percentage point’s year-on-year to 14.77 percent in Q1 2018 from 15.6 percent recorded in the corresponding quarter of 2017. On a Quarter-on-Quarter basis, the oil sector grew by 13.24 percent in Q1 2018.
The oil sector contributed 9.61 percent to total real GDP in Q1 2018, up from 8.53 percent and 7.35 percent recorded in the Q1 2017 and Q4 2017, respectively
“Nigeria’s Oil GDP was 14.77 percent in Q1 2018 compared to non-oil GDP of less than 1 percent. A testimony to the impact of higher oil price, we expect robust Oil GDP growth for the first three quarters of 2018, due to higher oil price and low base effect,”Jubril Kareen, energy analyst, Ecobank said in a tweet.
The non-oil sector grew by 0.76 percent in real terms during the reference quarter. This is higher by 0.04 percent point compared to the rate recorded same quarter of 2017 and 0.70 percent point lower than the fourth quarter of 2017.
This sector was driven mainly by Agriculture (Crop production); other drivers were financial institutions and insurance, Manufacturing, Transportation and Storage and Information and Communication.
In real terms, the Non-Oil sector contributed 90.39 percent to the nation’s GDP, lower than 91.47 percent recorded in the first quarter of 2017 and 92.65 percent recorded in the fourth quarter of 2017.
In the 2018 budget, the government projected a growth rate of 3.5 percent but some analysts have said that with the current growth figure GDP recorded in Q1 2018, it might not be achievable.
“With this 1.95 percent growth rate, I don’t think we will achieve the 2018 budget growth rate projection. The build up to the 2019 general elections may not allow us enjoy the full benefits of some of the economic policies but I see us ending around 2.2 or 2.3 percent,” Chukwu said.
BUNMI BAILEY & OLALEKAN IPELE
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