Q4 2020 GDP: A Welcome Exit from Recession

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Friday, February 19, 2021 / 09:12 AM / By FBNQuest Research / Header Image Credit: NBS


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From the latest national accounts, we find that GDP growth returned to positive territory in Q4 '20. Modest growth of 0.11% in the quarter compares with contraction of -3.62% the previous quarter and 2.55% in the year-earlier period. Our expectation was a slowdown in contraction to -1.95% and was undone by robust growth of 3.42% for agriculture, the sector's best showing since Q4 '17.

 

Several times we have made the point that Nigeria's performance would be more muted than that of most emerging markets due to the protection its large informal economy enjoys from global headwinds (such as COVID-19). The argument still holds but it could now be that the credit interventions of the CBN, state development banks and others are starting to have an impact (although the fourth quarter is generally the sector's best).

 

The NBS shows average crude oil output of 1.56mbpd in Q4, compared with 2.00mbpd in the year-earlier period. This is broadly consistent with compliance with Nigeria's OPEC quota of 1.41mbpd, since raised to 1.52mbpd for Q1 '21, and with adding back condensates. The oil economy shrank by -19.76% y/y.

 

The share of crude petroleum and natural gas in real GDP slipped to 5.87% in Q4 but would be closer to 40% if we allowed for its linkages within the economy. It remains the fifth largest sector after agriculture, trade, information and communications, and manufacturing. We note that info and comms, having posted double-digit growth for three successive quarters, came close to overtaking trade for the no 2 slot. This would have been unthinkable before the emergence of the virus. 

 

Since the national accounts are not seasonally adjusted and since the fourth quarter tends to be the strongest of the year due to the demand boost in the holiday season, we should not assume automatically that Nigeria has exited its latest recession. Q1 '21 could well prove a borderline case.

 

The share of services in GDP rose to 54% in Q4, gaining both from the primary and secondary sectors. Nigeria emerged from its last rebasing of the national accounts in 2014 as a predominantly services economy. A repeat is underway (Good Morning Nigeria, 05 February 2021), and this trend is likely to be reinforced. A listing and survey of new firms are two early steps in the rebasing exercise and will surely favour ascendant sectors such as info and comms.

 

For the full year, GDP contracted by -1.92%. This compares with growth of 2.27% in 2019.

 

Real GDP, oil and non-oil growth (%chg; y/y)

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Source: National Bureau of Statistics (NBS), FBNQuest Capital Research

 

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