Nigeria Q1’20 GDP – Economic growth slows to 1.87% y/y in Q1’20

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Economic growth in Nigeria slowed to 1.87% in the January-March quarter from a year ago, according to the GDP data released by the National Bureau of Statistics (NBS). This makes it the slowest growth since Q4’18, as disruptions to global supply chains and a collapse in external demand weighed on overall economic activity. Q1’20 annual growth rate was lower than both the Q1’19 (2.10% y/y) and Q4’19 (2.55% y/y) growth rates.

Oil sector leads expansion with 4.59% y/y growth

The oil sector, which accounted for 9.50% of real output in Q1’20 (Q1’19: 9.22%) expanded by 5.06% y/y compared to a 1.46% y/y contraction in Q1’19. The performance of the oil sector was driven by the low base from Q1’19, on the back of a three-week downtime in the Nembe Creek Trunk Line. In addition to improved uptime on the Nembe Creek Trunk Line, improvement in oil production at the Egina oilfield contributed to the eighty thousand barrel increase in average oil production to 2.07mbpd in Q1’20 from 1.99mbpd in Q1’19. This supported a much stronger recovery in the sector in Q1’20, over Q1’19. Consequently, the oil sector contributed 25% (worth ₦76.61bn) of the additional output in Q1’20, over Q1’19.

In contrast to the oil sector, growth in the non-oil sector slowed to 1.55% y/y in Q1’20 (Q1’19: 2.47% y/y) as growth in most sectors – including the agriculture (Q1’20: 2.20% y/y), manufacturing (Q1’20: 0.43% y/y) and construction (Q1’20: 1.69%) sectors which accounted for 36% of aggregate real output – slowed in the period, compared to a year ago. The services sector composition of non-oil output remained pretty much unchanged at 60.10% (Q1’19: 60.09%). However, growth in services slowed to 1.57% y/y (Q1’19:
2.41% y/y) on account of contractions in trade and real estate.

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Specifically, the trade sector – which constituted 18% of non-oil real output – contracted by 2.82% y/y in Q1’20 (Q1’19: 0.85% y/y) as the outbreak of the coronavirus disrupted global supply chains and weakened external demand for the country’s exports. Similarly, the real estate sector – that constituted 6% of non-oil GDP in Q1’20 –contracted further by 4.75% y/y as income levels remained weak, dampening growth in the sector. On the flip side, the telecommunications & information subsector – that contributed 12% to non-oil real output- grew by 9.71% y/y. The sector was also the single largest contributor (56%) to Q1’20’s additional output, over Q1’19, with an absolute contribution of ₦161.16bn.

Tangible output extends recovery to 2.26% y/y in Q1’20

Tangible output (i.e. agriculture, mining, manufacturing, and construction) expanded its recovery in Q1’20 to 2.26% y/y, over a Q1’19 growth rate of 1.69% y/y. The stronger recovery intangible output was led by the agriculture sector which contributed 47.32% to the additional tangible real output in Q1’20, over Q1’19. Target-lending by the central bank to players in the agriculture space has helped improve the sector’s productive capacity while the closure of the land-borders has encouraged agriculture players to increase output.

Also, the contribution of the agriculture sector to GDP was slightly higher in Q1’20 (21.96%) than its Q1’19 contribution (21.89%). The continued recovery in tangible output is supported by ongoing monetary and fiscal policy measures targeted at improving productivity in the sector. However, the performance of the agriculture sector still lags its 5-year average of 3.16% y/y. Although the agriculture sector was the largest contributor to growth intangible output in Q1’20 over Q1’19, growth in the sector slowed to 2.20% y/y in the review period, compared to a growth rate of 3.17% y/y recorded in Q1’19.

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The mining sector, riding on the oil sector’s low base from Q1’19, recorded an output growth of 4.58% y/y in Q1’20 from a 1.37% y/y contraction in Q1’19. In consequence, the sector had the second-highest contribution to tangible output, contributing 41.77%. On the other hand, output from the construction sector in the review period underperformed its Q1’19 growth. In Q1’20, the construction sector grew by 1.69% y/y – much slower than the 3.18% y/y growth rate recorded in Q1’19. A sharp drop in oil receipts, pending budget revision and social distancing measures intended to contain the spread of the virus, are all contributory to the less impressive performance of the sector.

Read Also:  Prices of Kerosene, Diesel rise in April 2019 - NBS

The manufacturing sector recorded slightly positive growth (0.43% y/y) in Q1’20, but slower than its Q1’19 growth rate of 0.81% y/y. With the pandemic on our tails, sectors whose products are considered must-haves (i.e. food and clothing) – and accounted for 69% of the manufacturing sector – still recorded slightly positive growth in the Q1’20. Their growth in the review period was however slower when compared to Q1’19 growth levels, reflecting supply chain disruptions and lower demand levels as uncertainties increased with the persistence of the outbreak.

Technical recession looms

In 2020, partial lockdowns implemented across many states to contain the spread of the pandemic is expected to weigh on overall economic activity. The lockdowns which commenced at the end of March, and are likely to be in place through June, will weigh on operations across many sectors and limit their contributing output to growth. Social distancing measures, such as the reduction in the number of employees working on site, are also expected to persist for as long as a coronavirus vaccine is yet to found. As the earliest date for discovering a viable vaccine is put at 2021, we expect social distancing measure to weigh on many sectors for the rest of the year including the transportation, agriculture, manufacturing and construction sectors.

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We believe that remote work operations will reduce the demand for road transport, particularly in Q2’20 when partial lockdowns are still in place in many states across the country. In addition, mandatory limits on vehicle passengers will also weigh on output from the sector while fear of contracting the virus from human interaction – in the absence of a vaccine – could weaken the overall demand for road transport through 2020. The same expectations apply to air and water travel, especially as inter-state lockdowns appear to be more stringent than commuting within states. Consequently, we expect the transport sector output to contract by 0.36% y/y in 2020, from 10.73% y/y in 2019.

Restrictions on the transport sector are likely to weigh on activities across other key sectors of the economy. In the agriculture sector, the distribution of fertilizers and viable seedlings may be hampered while output from the manufacturing sector may be limited by delays associated with clearing imported inputs at the ports due to a reduction in port officials. The construction sector could also feel the impact of the delayed budget revision and underperformance of revenue targets while a limit on onsite employee concentration can slow the progress of construction projects.

Overall, most sectors are expected to record a slower pace in growth in FY’20 compared to FY’19. However, contractions are expected in H2’20 due to the unfavourable high base from H2’19. Historically, H2 output contributes over 50% to total output, as such a decline in H2 output is sufficient to plunge the Nigerian economy into a recession. Consequently, we expect the Nigerian economy to contract by -0.59% y/y in FY’20 – compared to a growth rate of 2.27% y/y recorded in FY’19 – as the impact of partial lockdowns and social distancing measures begin to bite. The slight contraction in the economy is due largely to an anticipated 1.22% y/y growth rate in real output from the oil sector, and continued growth in the telecommunications sub-sector. Ex-oil and telecommunications, the real output could contract by as much as 1.55% y/y in FY’20. While we believe the new normal of reduced face-to-face interaction could bode well for the telecommunications sub-sector, any disruption to oil production in the course of the year could widen the recessionary gap.

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Nigeria Q1'20 GDP - Economic growth slows to 1.87% y/y in Q1'20 - Brand SpurNigeria Q1'20 GDP - Economic growth slows to 1.87% y/y in Q1'20 - Brand Spur

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Nigeria Q1'20 GDP - Economic growth slows to 1.87% y/y in Q1'20 - Brand SpurNigeria Q1'20 GDP - Economic growth slows to 1.87% y/y in Q1'20 - Brand Spur

Latest News

Singapore Employees Lack Retirement Support From Companies While Financial Wellbeing Becomes a Top Priority: Aon Survey

SINGAPORE - Media OutReach - 14 April 2021 - Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, has released the findings of the 2021 Trends in Retirement & Financial Wellbeing survey for Singapore.

Working adults in Singapore ranked retirement planning as their top priority but an alarming 80% underestimate how much they really need to retire. While retirement support from employers is also lacking, further challenges remain around transparency in group retirement plans' investment offerings and employees foregoing long-term perspectives to seek short-term gains.

Ashley Palmer, Regional Managing Partner, Retirement & Investments, Asia for Aon, said, ""Employers can have a significant impact on how much their employees save by instilling smart habits and healthy money behaviours. The right long-term savings vehicles, effective communications and financial tools will help Singapore's workforce be more financially resilient in the wake of the COVID-19 pandemic."

The survey identifies three main themes in financial wellbeing and retirement support for Singapore employees.

Financial wellbeing support is the new employee expectation. As a result, close to 40% of employers rank an employee financial wellbeing strategy as their highest priority, followed by emotional and mental wellbeing support. The survey shows that 70% of Singapore employers will formulate or execute financial wellbeing programmes throughout 2021, in line with employee expectations. Companies also view offering a financial wellbeing programme critical in increasing employee engagement and remaining competitive in the talent market.

There is an increasing trend of employer-led supplementary savings plans. Currently, 22% of companies surveyed offer Central Provident Fund (CPF) top-up contributions to citizens and Permanent Residents. But, close to 40% of the working population in Singapore are foreigners who do not have access to CPF and are likely to have foregone their retirement benefits in their home countries. To bridge this gap, and to provide equitable retirement benefits to all employee groups, close to 50% of the organisations surveyed offer supplementary retirement benefits to their foreign staff. Financial services firms are leading in this practice, followed by the technology and the healthcare sectors.

Promisingly, a third of organisations in Singapore are prioritising a thorough review of their supplementary retirement arrangements in 2021.

Alicia Brittain, Senior Consultant & Actuary, Retirement & Investments, Singapore for Aon, said, "Forward-looking companies first need to understand the financial worries of their employees and identify the gaps in their benefits offering. The most effective approaches are aimed at changing individual behaviours towards money and savings and providing accessible programmes and vehicles to deliver sustainable change. For example, when organisations provide retirement benefits as cash-in-lieu, it is most likely immediately spent and so does not form part of an emergency fund or long-term savings for the employees' retirement years. Supplementary retirement plans solve this issue and are more flexible and cost effective - and can also offer contributions above the monthly CPF wage cap to increase employee savings."

Employees in Singapore lack a well-defined default investment strategy. Less than 30% of the surveyed companies in Singapore currently offer their employees an investment choice in their retirement plans, and only 15% of retirement plans have a default investment fund. This leads to employees selecting their own optimal investment funds. They may lack experience in understanding investments, which can lead to misallocating their money and result in inadequate retirement savings or excessive risk taking.

Brittain added, "The key to protecting employees and adding value to savings in any defined contribution retirement plan is a well-defined default investment strategy. This includes frequent performance monitoring, actively managing investment risks and dynamically reducing investment risk as employees move towards retirement."

Notes to Editors

The Aon 2021 Trends in Retirement & Financial Wellbeing for Singapore survey was designed to help organisations understand the unique retirement and financial needs of their Singapore workforce. This tri-annual survey was completed by organisations with employee populations ranging from five to over 4,000 and are based in Singapore. Responding Rewards and Benefits Leaders, HR and Finance Professionals provided feedback and insight on their organisations' financial wellbeing and retirement programmes, interests and concerns. Click here for the full report.

About Aon

Aon plc (NYSE: AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

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Nigeria Q1'20 GDP - Economic growth slows to 1.87% y/y in Q1'20 - Brand Spur
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