Ahead of next Monday’s release of Q1’19 Gross Domestic Product (GDP) data by the National Bureau of Statistics (NBS), we have taken our time to analyze the performance of the major drivers of the GDP over the said period, with a view to project what the growth figure for Q1’19 may print it. This we did by examining trends in the oil and non-oil sectors of the economy, as well as the impact of the 2019 general election which also took place in Q1’19.
Oil Sector
Drawing from our analysis of the OPEC Monthly Oil Market Report (MOMR) data, we expect the oil sector to record positive growth on a year-on-year basis, but compress on a quarterly basis. Our position is based on the outcome of our analysis which revealed that though the value (average daily quantity multiplied by average daily price) of Nigeria’s average daily crude oil production in Q1’19 increased by 23.4% (to $105.46m) when compared to Q1’18 (y/y comparison), it (the value) came in 5.7% lower when compared to $111.86m in Q4’18 (q/q comparison).
The expected leap in year-on-year value we believe will be majorly driven by the 21.8% increase in average price to $63PBL in Q1’19, compared to $52PBL in Q1’18, while the fall in quarter-on-quarter value is expected to be driven by a 6.4% reduction in average price (to $63 compared to $67PBL in Q4’18), which was not matched by corresponding increase in output level to attain/surpass the Q4’18 value.
Non-Oil Sector
We expect the mixed performance of the three non-oil sectors of Agriculture, Industries and Services. For the Agriculture sector, we expect growth performance to print within the bound of 2.2% – 2.6% compared to 2.4% reported in Q4’18. This we expect to be driven by the seasonal harvest and sales of major cash crops such as cashew nut and palm fruit over the period, as well as other food and vegetable crops. Nonetheless, we believe the potential of the sector will still be largely undermined by farmers lack of adequate access to cheap credit and modern equipment, the poor state of critical infrastructure and storage facility, and unrest in major agrarian communities in the country.
For the industries sector, we expect growth to print within the bound of 0.50% – 0.70% as against 0.95% in Q4’18. This we expect to reflect the weak expansion recorded in average Purchasing Managers Index (PMI) in Q1’19 (57.7%) relative to Q4’18 (58.6%). Although there was relative stability in the foreign exchange market over this period due to CBN period intervention, we believe high production cost environment, the weak purchasing power of consumers and the disruption of election timetable will weigh on the sector’s overall performance.
Also, we expect growth in the services sector to soften mildly to a range of 2.3% – 2.6% in Q1’19 as against 2.9% in Q4’18. Although we expect accelerated growth in services subsectors that were largely pivotal to the conduct of the last general election (such as Publishing, Transportation and Storage, Accommodation and Food Services, Information and Communication), we believe that weak performances in other sub-sectors such as Trade, Real estate, Finance and Insurance institutions and Professional, Scientific and Technical services will weigh on the sector’s growth potential.
Overall, we project a GDP growth rate of 1.6% for Q1’19 as against 1.95% in the corresponding period of 2018 and 2.38% in Q4’18.
