Today, the National Bureau of Statistics (NBS) released the GDP numbers for Q1-2018. Real GDP expanded by 1.95% y/y in Q1-18, relative to 1.93% y/y (revised upward to 2.1%) in Q4-17. This outperformed our expectation of 1.6%y/y for the quarter although below Bloomberg’s consensus estimate of 2.6%. Notably, the services sector relapsed, after rebounding in the prior quarter. Major sectors such as; Agriculture, Mining & Quarrying, Manufacturing, Transportation, and Storage all recorded growth in Q1-18, though overall growth remained fragile.
Oil-GDP: Quarterly growth rebounds amid growth in oil output
The growth in Oil GDP expanded to 14.8%y/y in Q1-18 faster than 11.2%y/y in Q4-17 and rebounded 13.2%q/q in the same period following a 7.5%q/q decline in Q4-17. Oil sector growth is buoyed by OPEC’s output cap together with weaker supplies from Venezuela and Libya, which supported oil price rally during the quarter amid production ramp-up in Nigeria without flooding global output. Notably, oil production advanced 2.6% q/q in Q1-18 to 2.0m barrels per day (mbpd) from a revised 1.95mbpd in Q4-17. Similarly, the oil sector’s contribution to real GDP inched higher to 9.6%, up from 8.5% and 7.4% recorded in Q1-17 and Q4-17, respectively.
Non-oil GDP: Slowdown even as Agriculture sector remain resilient
Growth in the non-oil sector slowed from 1.45% printed in Q4-17 to 0.76% in Q1-18 although 4bps higher than 0.72% in Q1-17. Growth in the non-oil sector remained supported by continued improvement in Agriculture (+3.0%) and Financial (+13.3%) sectors, while the Insurance (+18.1%) and Information & Communication (+1.6%) sectors rebounded from the prior 2 and 3 consecutive quarters of contractions respectively, to further support the non-oil GDP growth. Activities in the Real estate (-9.4%) remained largely underwhelming, while Construction (-1.5%) and Trade (-2.6%) sector, which is also key contributors to aggregate output level, relapsed into the negative territory. Nonetheless, the Non-oil sector’s contribution to GDP eased slightly to 90.4%, 1.1% below the 91.4% in the corresponding quarter of 2017, and 2.3% below 92.7% in Q4-17.
Agric sector GDP slows to 3.0% y/y as livestock activities tumble 1.9% y/y
The Agriculture sector grew 3.0% y/y, slowing by 1.2% and 39bps when compared to performance in Q4-17 and Q1-17 respectively. This was traceable to a 1.9% decline in livestock activities as well as weaker growth in crop production which rose 3.5% in the period in contrast to 4.6% and 3.5% in Q4-17 and Q1-17 respectively, despite stronger performance in forestry (+2.9% y/y) and Fishing (+4.3% y/y) activities. Notably, Agriculture GDP as a proportion of aggregate GDP improved to 21.7% in Q1-18 compared to 21.4% in Q1-17 but declined compared to 26.1% in Q4-17.
Manufacturing sector improves 3.4% y/y
Much in line with the sustained expansion seen in the CBN’s Manufacturing PMI readings throughout Q1-18, Manufacturing GDP, rose 3.4% y/y in Q1-18, relative to 0.1% and 1.4% in Q4-17 and Q1-17 respectively. Growth in the sector was driven by faster y/y growth in food, beverage & tobacco (+5.5%); and textile, apparel & footwear (+1.9%) activities which account for the largest portion of the sub-sector. Also, this was further supported by a rebound in Oil refining (+7.1%) and Cement (+5.3%) activities. Undoubtedly, improved government efforts to shore up the productivity of local refineries amid increasing private participation in local refinery activities, account for this positive development. The sector contributed 9.9% to real GDP in Q1-18, up 1.0% and 10bps relative to Q4-17 and Q1-17 respectively.
Outlook: Growth remains vulnerable
With the sustained uptrend in the global oil market as well as sustained optimism in the local economy, we maintain our view that the momentum in the Nigerian economy will strengthen in 2018 relative to 2017. This is expected to be supported by stability in the N/Delta region sustained growth in the Agriculture sector and rebound in consumption spending. However, the relapse in the services sector is a concern given the overbearing weight of the sector on the broader economy. Nonetheless, we expect growth to hasten in Q2-18, as the recent currency swap arrangement with China, signed during the period, will likely further boost trade and consumption. Thus, we project Q2-18 growth at 2.4%y/y while maintaining our 2.5%y/y growth for 2018. Yet, economic growth remains vulnerable to the vagaries of the oil market (both externally and internally) in view of capital flow reversal and rising risk in the polity even as we are yet to see appreciable momentum in structural reforms that could unlock growth in the non-oil sector.
UNITED CAPITAL RESEARCH