Wednesday, March 09, 2016 08:58 AM /FBNQuest Research
The latest national accounts from the NBS show that GDP growth (at constant basic prices) slowed to 2.1% y/y in Q4 2015 from 2.8% the previous quarter. These are very poor figures, and worse than expected. The imported macro headwinds did not improve.
The fourth quarter is generally the strongest of the year due to enhanced household demand for the end-year festivities. Headline growth was weakened by oil sector contraction of -8.3% y/y. The fact remains that unchanged non-oil economy growth of 3.1% y/y disappointed.
The poor data are the consequence of the exposure of Nigeria’s Achilles heel. The slump in the oil price has eroded government revenues and dramatically reduced the supplies of fx for an import hungry economy. At the same time, household consumption has fallen as a result of the trickledown from the oil to the non-oil economy.
Without a marked recovery in the oil price, which is not our expectation over the next 18 months, the economy will continue to struggle under the weight of these challenges. The FGN’s plans to remodel the economy cannot have a rapid impact.
In the meantime, the bright spots are likely to remain segments which have limited dependence upon imports and which supply goods and services that could be termed essential.
Public administration again contracted, by -13.1% y/y (vs -12.8% in Q3).
If oil output is flattish, we see growth in Q1 at no more than 2.0% y/y. Benefits from the projected sharp rise in capital spending in the FGN’s budget proposals will not really be felt until H2 2016.