Q1 2018 GDP Figure: Still Miles Away From An Escape Velocity


Wednesday, May 23, 2018 01.42 PM / Proshare Research


Price Dynamic 

Fig 1:  Movement in Market and Constant Prices

 Proshare Nigeria Pvt. Ltd.

Source: NBS


The recently published national account figures for the first Quarter of 2018 by the Nigerian National Bureau of Statistics showed that the Gross Domestic Product at market prices stood at N28.70 trillion at the end of  1st Quarter 2018, thus reflective of a slight faint in Market value of GDP  by 0.9%. 

Concurrently, Gross Domestic Product at constant value stood at N16.24 trillion at the end of 2014, thereby slipping by 14%. Thus, the on-going implicit price dynamic weighed down prices at both price conduits. 

Nominal Against Real: Marrying The Disconnect 

Nominal gross domestic product rose by 9.4%   at the end of the first quarter of 2018, thus reflective of a swell in momentum by 2.1% compared to the previous quarter. However inflation adjusted gross domestic product, the real gross domestic product rose by 1.95%. 

In contrary to the previous quarter, nominal gross domestic product witnessed a pick-up.  


Fig 2: Nominal and Real Gross Domestic Product 

 Proshare Nigeria Pvt. Ltd.

The swell in oil price coupled with bullish sentiments in the oil sector forced an upward review in real gross domestic product for the Fourth quarter of 2017. Matching current inflation adjusted gross domestic product against the previous.  The dynamic results into a slowdown in momentum in real gross product in Q4.   

A combination of ripening of the slack season and deceleration in both input and output prices forced GDP prices down, even though they remain above the turning point.


Fig 3: Oil Production Per Barrel 

Proshare Nigeria Pvt. Ltd.

     Source: NBS   


Oil production in the first quarter of 2018, stood at 2.01 million barrels per day. Thereby reflecting 3.07% growth compared to the previous quarter. Tracking the bonny light reference crude, the average cost of the bonny light stood at $66.5 per barrel. Implying a 6.4% increase in price compare to the previous quarter.


Sector wide:  Who Brought What? 

Fig 4: Growth across sector

Proshare Nigeria Pvt. Ltd.

Source: NBS


The agricultural sector grew by 3% at the end of the first quarter of 2018, thereby growing at its lowest level in the last four quarters.  Although the agricultural sector is expected to experience a slack season due to climatic factors, however, the sector is plagued by wider risk. 

The grim reality of Crop production growing by 3.45%, far less than both the previous and corresponding quarter, which were 4.23% and 3.49%. Captures the inherent risk in the food belts of the country.  Moreover, the continuous depression in livestock contribution to -1.9%. 

It underlines a sector grappling with cattle rustling coupled with farmers and herdsmen crisis.    


Fig 5; Growth in the livestock sub-sector

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The mining and quarrying sector grew by 14.85% far higher than the previous quarter growth of 10.7%. Such growth was a product of growth in the specific subsector such as metal ore and oil which grew 45.9% metal and 25%. The manufacturing sector grew by 3.39%, climbing to its highest growth level prior to the wake of the recession.  

The refining sub-sector emerged as the comeback kid of the sector, as the sub sector grew from -25% in the previous quarter to 7% at the end of the first quarter.  Eventually, providing the necessary lift to the sector.   

Sectors, such as public administration, education and health which are dominated by government activity, all declined by -0.72, -1.22 and -082.  The sectors have been riddled by underinvestment.  The lag in budget passage in bit affected their individual performance, thereby eroding their individual output level.    

The trade sector fell retreated back to negative territory as the sector grew by -2.57% at the end of the first quarter. The seasonal effects   that supported both consumer spending and trade had come to an end, thereby leaving the sector to return into negative territory.  

Although sectors such as accommodation and food and recreation sectors grew by 0.29% and 0.3%, as both sectors experienced  slowdown in momentum. At the same pinpoint to the fact that such sectors were not completely immune from seasonal pull back, even though avoiding a capitulation to negative territory.  

Road transport and storage by 14.45 and 15.53%, regardless the individual sectors slowed down compared to the previous quarter. 

Expectedly growth in the road sector was expected to retreat due to end of the seasonal holiday witness in the previous quarter.  However with the , climatic activity will reduce storage activity for agricultural goods especially.       

The Construction sector also retreated back to negative territory as the sector grew from 1.54% compare to 4.4% at the end of the last quarter of 2017.  Lean government spending with regards capital expenditure pull the sector back to the negative zone. The recent passage of the 2018 appropriation should provide the sector, with the needed boost. 

Sector considered to be utility in nature, Electricity supply and waste management grew by 4.93% and 11.61% respectively compared to 16.23% and 1.23% compare to the previous quarter. The financial sector further built on its earlier momentum of 0.23% in the previous quarter to grow by 13.3% by the end of the first of 2018. 

The present leap in momentum by the sector, put the sector at its highest growth level prior to the recession. This is largely on the back of moderation in non-performing loan coupled with sustained improvement in oil prices. Certainly, this nail the coffin of a possible Trojan. 

The real estate sector continues to experience bloodletting, as the sector dipped by 9.4%, making it the highest dip in (nine) 9 quarters. The huge structural risk, disjointed policy framework coupled with relatively weaker gross savings of households bedevils the sector. 

The information and communication sector grew by 1.58% returning back to the positive territory after three successive quarters of decline.  The upswing in the sector was rooted in the Telecommunication sub-sector as the sub sector come out of negative territory for the first time. As the sub sector grew by 1.88% at the end of the first quarter of 2018. 

The dynamic pinpoint to the strong correlation of 0.99 between the telecommunication sub-sector and the broader sector, thereby dictating the direction of the sector. The professional services and administrative services fell by -2.52% and 0.2% at the end of the corresponding quarter.  


Our Thoughts: Running A Highs and Lows Test 

Proshare Nigeria Pvt. Ltd.

Source: Proshare


Actual Where Are We Really?  Growth Gaps and The New Normal of Secular Stagnation  

Evidently, Nigeria has come out of a growth break, but the economy is far short from returning into a growth spell. At the same time Nigeria is not new to growth break, the growth breaks began as output began to fall from double digits growth in the early 2000 to single digit.  Nigeria never reached supernormal growth, the abrupt break to the double digit growth era were due to policy reversals and growing uncertainty.  

However, we are experiencing a more pounced growth gap, whereby per capital income is left unchanged as growth is lagging behind population growth. It is expected that Nigeria will be one of the 40 countries that will experience a diminishing in the nation’s per-capital income in 2018.  

In reality the new norm is secular stagnation, thus the economy is in desperate need to achieve an escape velocity; the precondition for a growth spell.  Therefore, Nigeria need to return back to 5% growth levels to fully achieve an escape velocity.       


Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

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