Nigeria Exits Recession by 0.11% Rise in Q4 ‘20 Real GDP; Records 16.47% Inflation in Jan ‘21…

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Traders' Voice… A Recession, For How Long Brandspurng

In the just concluded week, freshly released data from the National Bureau of Statistics showed Nigeria exited recession in the last quarter of 2020 having printed a year-on-year (y-o-y) real output growth rate of 0.11% to N19.55 trillion (or USD122.44 billion) as lockdown measures were significantly eased, allowing households and business to resume economic activities; and in spite of the anti-SARS protests in several parts of the country.

This is in addition to the several billions of Naira in economic stimulus packages provided by the monetary and fiscal authorities to help households and businesses cope with the ravaging effect of COVID-19.

Traders' Voice… A Recession, For How Long Brandspurng

Sector-wise, the exit was propelled essentially by a 1.69% growth in the non-oil sector; with the Information & Communication, Agricultural and Real Estate sectors registering the biggest growth rates of 14.95%, 3.42% and 2.81% respectively.

The oil & gas sector, however, saw a 19.76% y-o-y decline in real output to N1.15 trillion (or USD7.63 billion) as average daily oil production fell quarter-on-quarter (q-o-q) by 6.6% to 1.56 million barrels per day (mbpd) amid production cuts imposed by Opec+.

Nigeria Exits Recession by 0.11% Rise in Q4 ‘20 Real GDP; Records 16.47% Inflation in Jan ‘21 brandspurng
Source: NBS, US EIA, Cowry Research

For full-year 2020, real GDP declined y-o-y by 1.92% to N70.01 trillion (or USD465.85 billion); with the non-oil sector moderating by 1.25% to N64.30 trillion (or USD427.82 billion) and the oil & gas sector plunging by 8.89% to N5.7 trillion (or USD38.01 billion).

Information & Communication and Financial services sectors saw the biggest annual growth rates of 13.18% and 9.37% respectively while the Agricultural sector, the biggest contributor to real GDP at 26.31%, grew by 2.17%.

In a related development, headline inflation rose to 16.47% in January 2021 (higher than 15.75% printed in December 2020). The increase in the inflation rate was caused by a persistent increase in average food prices and non-food prices.

Food inflation spiked to 20.57% (from 19.56% in December) driven by rising in prices of bread, cereals, potatoes, yams and other tubers, meat, fruits among others.

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Imported food index also upped to 16.70% (higher than 16.64% in December) despite the appreciation of the Naira at the parallel market – specifically, two months moving average foreign exchange rates at the Parallel market fell y-o-y by 0.02% to N474.70/USD in January 2021.

Core inflation climbed to 11.85% (from 11.37% in December) as healthcare and transport costs continued to surge at their fastest annual rates in short term sequence to 14.55% and 13.55% respectively amid the rising cost of medical services, hospital services, pharmaceutical products and paramedical services as well as fuel costs for passenger transport.

Urban and rural annual inflation rates rose higher to 17.03% and 15.92% respectively.

On a monthly basis, headline inflation moderated to 1.49% in January (from 1.61% in December) driven by a slower increase in food inflation to 1.83% (from 2.05% in December) as the yuletide seasonal effect came to an end in January and as the land borders were re-opened.

However, Core inflation rose to 1.26% ( from 1.10%) amid a monthly increase cost of petrol and healthcare services.

We believe Nigeria’s economy remains well on track to see a convincing recovery amid a return to economic activities, the administration of the COVID-19 vaccine, strong crude oil prices and the numerous stimulus packages. We nevertheless expect the Nigerian authorities to take necessary measures to strengthen the fragile recovery.
Meanwhile, we expect the general price level to increase further in the next few months as the sowing season begins when food stockpiles are expected to decline even amid the disruptive insecurity in food-producing parts of Northern Nigeria.
Also, core inflation is expected to continue its ascent, driven by higher pump prices given the sustained rally in crude oil prices.