Analysts forecast average Q1 GDP of 2.36% ahead of official data
by Endurance Okafor
May 21, 2018 | 12:14 am| | | Start Conversation
Analysts expect the Nigerian economy to expand further in the first quarter of 2018, fuelled by improved dollar liquidity, positive expansion in Purchasing Managers’ Index (PMI) and consecutive decline in inflation rate in the period under review.
This is ahead of an official statement scheduled to be released today by the National Bureau of Statistics (NBS), the Nigeria data agency.
The mean estimate of five economists polled in a BusinessDay survey was 2.36 percent growth in Q1 of 2018, in what will be the fourth quarterly consecutive positive expansion since Africa’s largest economy exited recession in Q1, 2017 helped by increased oil production and prices, further improvements in foreign exchange liquidity and a rebound in non-oil activity.
Ayo Akinwunmi, the Head of Research at FSDH Merchant Bank had the highest prediction for the Q1 GDP figure.
“I forecast a 3.55 percent growth rate in the Gross Domestic Product (GDP) for Q1 2018, this is following the unexpected oil price increase, as this has brought more confidence on the economy, as reflected in the PMI values released in the last few months,” Akinwunmi told BusinessDay by phone.
Johnson Chukwu, MD of Cowry Asset Limited expects over 2 percent growth in Q1 buoyed by non-oil sector growth being positive coupled with expansion of the PMI, declining inflation rate and increase in hotel occupancy rate.
Tajudeen Ibrahim, head of research at Lagos-based investment firm, Chapel Hill Denham, said through a telephone response that they expect the real GDP growth at an estimate of about 2.1 percent year-on-year in Q1 2018, which is supported by recovery of non-oil sector, positive expansion of PMI.
“Improved availability of the US dollar for businesses and manufacturers to carry out their various transactions and the PMI values which were well above the 50 percent index point coupled with the downward slide in inflation rate are the drivers of the GDP forecast for the period,” Ibrahim said.
Bismarck Rewane, CEO of advisory firm, Financial Derivatives Company, however had the least forecast for the GDP growth to expect as the Q1 figures.
“The growth for the period is going to be flat, it is not going to be like the 1.9 percent recorded in the fourth quarter of last year but it is going to be slightly lower or flat at around 1.7-1.8 percent year-on-year in the period under review owing to flat oil prices,” Rewane said.
After five straight quarters of contraction between the first quarter of 2016 and early 2017, Africa’s largest economy exited recession in the second quarter of 2017, after expanding 0.72 percent.
That was soon followed with a 1.4 percent growth in the third quarter, as a recovering oil sector- which was benefitting from a price rally and stable production- and strong agricultural output helped lift growth.
In Q4 of 2017, Nigeria’s economy grew by 0.83 percent while overall; the GDP growth reached 1.92 percent up from the previous quarter growth, a clear positive trajectory in 2017.
Into Q1 2018, a flurry of macro-indicators from oil prices and production; to the trend in the Purchasing Managers Index (PMI), declining inflation rate have leaked clues on what could be the fourth successive quarter of GDP expansion.
Brent the benchmark against which Nigeria’s crude is priced rose beyond a four year high at $75 on Monday, 7 May, 2018; highest since November 2014 as traders braced up for US withdrawal from Iran, the third-biggest producer in the Organization of Petroleum Exporting Countries (OPEC).
This is after it closed the year 2017 at around $66.87 from about $53 per barrel at the start of last year.
“Thanks to higher oil output over Q1 2018 (2mbpd) relative to the base period (1.75mbpd), oil GDP growth is likely to print at between 13-15% y/y. Non-oil output is likely to track higher as well on account of the improved FX liquidity picture which will resonate in stronger manufacturing growth as well as increased trade output. Though subscriber growth recovered over Q1 2018 to 149million, the reading remains 2% below Q1 2017 which could translate to an extension of the contractionary trend in ICT. Extended weakness in real estate as activity remains muted will continue to soften GDP growth. In all real GDP growth is likely to print anywhere between 2.3-2.6% for the first quarter as Nigeria continues to consolidate on the exit from recession in 2018,” Wale Okunrinboye, Head, Investment Research at Sigma Pensions said.
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