Analysts see 1.6% Nigeria growth in Q4 ahead of official data today


February 27, 2018 | 2:11 am
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Ahead of an official statement today by data agency, the National Bureau of Statistics (NBS), analysts expect the Nigerian economy consolidated on its recovery from recession in the fourth quarter of 2017 helped by increased oil production and prices, further improvements in foreign exchange liquidity and a rebound in non-oil activity.
The mean estimate of 12 economists polled in a BusinessDay survey was 1.6 percent growth in Q4, while a separate estimate points to full-year growth of 1 percent.
“We expect the real GDP growth for 2017 at 0.8 percent year-on-year and +1.8 percent yoy in Q4-2017, which will likely be supported by high crude oil production and recovery of non-oil GDP,” Tajudeen Ibrahim, head of research at Lagos-based investment firm, Chapel Hill Denham, said in a note to clients.
Bismarck Rewane, CEO of advisory firm, Financial Derivatives Company, expects 2 percent growth in Q4 and a full-year growth of 2.2 percent buoyed by “increased agricultural output, a recovery in oil revenue, infrastructure development and a pick-up in non-oil growth.”
Wale Okunrinboye, a fixed income and currency analyst at Ecobank Group also believes “the economy consolidated on its recovery from recession in Q4 2017 on account of increased oil production and prices, improvements in FX liquidity and greater traction on budget implementation.”  Coming from a low base would also be impactful, he said.
An official report by the NBS is due February 26, according to a data release calendar on its website.
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.
Enter Q4 and a flurry of macro-indicators from oil prices and production; to the trend in the Purchasing Managers Index (PMI) have leaked clues on what could be the third successive quarter of GDP expansion.
Oil prices have raced to multi-year highs since the OPEC petrostates and Russia cut output by a cumulative 1.5 million barrels daily in November 2016 to drain a supply glut that dampened prices; a cut Nigeria was exempted from.
In the three months through December 2017, oil prices averaged $56 per barrel according to Bloomberg data, almost double the average price of $38 in the same period of 2016.
Brent crude, the benchmark grade for Nigerian oil, fell 0.46 percent to $67 per barrel Monday, 24 percent higher than 2017’s average of $53.7 per barrel and 50 percent higher than the 2018 budget benchmark.
More crude is also being pumped in Africa’s largest oil producer, as militant attacks on oil pipelines that crimped output by a third in 2016 cool.
Nigeria pumped some 1.8 million barrels of crude between October and December 2017, 50 percent higher than the same period of 2016, as repair works on damaged pipelines come to a close.
Given the absence of militant activities in major oil hubs, the Economist Intelligence Unit (EIU) projects a more conservative Nigeria production forecast of 1.67mbpd in 2018 and expects oil prices to average $63pb in 2018, owing to expected geopolitical concerns in Saudi Arabia and the political imbalance in Libya.
Increased oil prices and production have rubbed-off on dollar flows into the country, helping ease a crippling dollar scarcity that contributed to the country’s economic recession in 2016.
More petrodollars mean the Central Bank of Nigeria (CBN) has seen improved dollar flows, while the introduction of a market-determined window called the Investors’ and Exporters’ window in April 2017 has meant autonomous inflows are up and running.
The country’s external reserves have since swelled to $41 billion, which provides some 10 months of import cover.
Despite these, the economy remains at risk to external shocks as another oil price rout could put paid to gains recorded thus far, even as economic growth below 6 percent is likely to elude Africa’s most populous nation which produces people at the rate of 3 percent annually.
The oil sector increased 25.9 percent year-on-year (y/y), the highest ever since 2010.
Quite worryingly however, non-oil GDP (90 percent of GDP) contracted by 0.76 percent due to sustained negative growth in Services, Trade, Information & Communication and Real Estate.
PMI trend
Nigeria’s Purchasing Managers Index (PMI) trend also suggests the economy expanded in the fourth quarter, as average manufacturing and non-manufacturing index averaged 57.5 points.
PMIs are leading indicators of business sentiment and have demonstrated a strong correlation with GDP growth, as is the case with Nigeria and other countries. It helps investors make predictions on economic growth.
Readings above 50 are indicators of increasing activity and tend to precede Nigeria’s GDP growth, according to a trend analysis computed by BusinessDay.
Nigeria’s PMI had flashed signals of an economic downturn in the first quarter of 2016 before an official GDP report by the NBS went on to confirm the slump.
It also flashed a signal of recovery in the second quarter.
The average manufacturing and non-manufacturing PMI in the months that make up the second quarter (April, May and June) was 52.1 points, as deduced from data provided by the CBN data at the time. The NBS would go on to confirm the recovery.



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February 27, 2018 | 2:11 am
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