Thursday, June 02, 2016 10:37AM /FBNQuest Research
From the national accounts for Q1 2016 we today highlight the five worst performing sectors. We include what the NBS terms activity sectors, which are often subdivided into segments, and only those accounting for at least 1% of GDP at constant basic prices.
For the larger picture, the NBS report shows that the primary sector (agriculture) expanded by 3.1% y/y and the tertiary (services) by 0.8%, while the secondary contracted by -5.5%. This last underperformance is largely due to manufacturing and construction (see chart).
Manufacturing contracted by -7.0% y/y in Q1, and its largest segment (food, beverages and tobacco) even more rapidly, by -11.2%. In this context, we would highlight the fx scarcity as the principal driver.
Construction contracted by -5.4% y/y, and its main players will be hoping that the FGN can release funds soon for its capital programmes, which are projected to consume as much as N1.6trn in the 2016 budget. At this point, full delivery appears unlikely.
Services expanded modestly in Q1 despite the swing from growth of 6.4% y/y in Q4 to contraction of -11.3% in finance and insurance. We link this steep decline to a combination of substantial fx-denominated loan books, general challenges over asset quality and headcount reductions.
For Q2, we see negative GDP growth of -2.9% y/y. The contraction of the oil sector is set to accelerate (from -1.9% y/y in Q1), given the sharp rise in pipeline sabotage. The fx and other prevalent shortages will continue to weigh heavily upon most non-oil sectors.