GDP report shows non-oil sector as main driver of economic growth

Following the decline in Nigeria economy, the real GDP growth slowed to 1.5 percent y/y in Q2’18 as against Q1’18 1.9 percent y/y.

However there was a substantial improvement relative to 0.7percent y/y in Q2’17. This slow growth was largely driven by weak oil production.

The oil sector recorded a decline in growth to 3.9 percent y/y in Q2’18, the lowest in four quarters, as oil production fell from 2 million barrels per day mbpd in Q1’2018 to 1.84mbpd in Q2’18 then Q2’17 1.87mbpd.

growth in the non-oil sector improved to 2 percent y/y, the highest since 2016, reflecting substantial improvement in the services sector such as transportation and storage, information & communication and construction accounting for 53.9 percent of total real GDP.

Agriculture growth slowed to 1.2 percent y/y, the lowest since 2015 and 1.8 percentage points lower than the previous quarter. The decline in agricultural growth was largely due to slower expansion in crop production to 1.5 percent y/y Q1’18 from 3.4 percent y/y.

The slowdown in crop production growth was primarily driven by the tensions arising from the herdsmen crisis in the North and other areas of the country, in addition to flooding across major farm belts.

This decline saw manufacturing growth fall to 0.6 percent  y/y in Q2’18 from 3.3 percent  y/y in Q1’18, primarily due to a decline in growth of the food, beverage and tobacco sector which dropped to the lowest in five quarters from 5.4 percent y/y in Q1’18 to 1.2 percent y/y in Q2’18.

On-going down trading in the sector alongside the increase in excise duties on alcohol and tobacco products have continued to hamper growth. Even with the decline the services sector expanded to 2.1 percent y/y in Q2’18 as against Q1’18 0.4 percent y/y, the highest growth recorded since 2016.

Affirming to a PriceWaterHouseCooper forecast that recovery in the non-oil sector will drive growth in full year 2018. This growth was driven by an improvement in heavy sub-sectors such as information and communication which was 11.8 percent y/y, transportation and storage 21.7 percent y/y and construction 7.6 percent y/y.

According to PWC report, it is believed that a continuous improvement in the macro economy should drive growth in H2’18. This growth should be supported by on-going reforms in the external business environment.

Very recently  the companies and allied matters act (CAC) that has not be amended for the past 28 years has been passed by the senate to the house of representatives to repeal and re-enact the bill.

In addition, PWC forecasted that there would be a gradual recovery in consumption due to continuous moderation in inflation. It is also expected that the non-oil sector could be the main driver of growth if supported by the Federal Government’s (FG) continuous effort to diversify the economy from oil.

However, the FG has to ensure that real GDP grows at a faster rate than population growth which is currently at 2.6 percent, for economic growth to be inclusive.