An Abrupt Halt to Economic Momentum


Thursday, May 28, 2020 / 11:22 AM / by FBNQuest Research / Header Image Credit: FBNQuest 


The national accounts for Q1 2020 show GDP growth at 1.9% y/y, compared with 2.6% in the previous quarter and 2.1% in the comparable year-earlier period. The oil & gas sector expanded by 5.1% y/y on the back of an increase in average crude output according to the NBS from 1.99mbpd to 2.07mbpd. The non-oil economy grew by 1.6% y/y, compared with the year-earlier 2.5%.

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The real economy was building up some momentum, albeit at a frustratingly slow pace, before the arrival of Covid-19, which began to have an impact in March.


Oil's share of GDP widened to 9.5% in Q1 but would be closer to 40% indirectly once we allow for the linkages with other sectors.


The current quarter is set to be the worst in this cycle as it coincides with the selective full lockdown as well as the low point for the global oil industry. We have the contraction of GDP at -8.3% y/y in Q2 2020, of the non-oil economy at -7.2% and of the oil & gas sector at -19.1%.


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

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Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research


There are forecasts in circulation of GDP contraction above -7.0% for the full year. Some economies may suffer such in 2020. However, it would be highly unlikely for an economy with a large agriculture sector, a sizeable informal economy and gaps in its integration within the global economy.


Our expectation is -3.1%. Without taking the moral high ground, we have seen few macro forecasts in this tricky environment from our industry in Lagos. We are expected to show our heads above the parapet.

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