Nigeria: Non-oil economy in the driving seat


Tuesday, November 18, 2014 8:44 PM / FBN Capital Research    


GDP growth slowed to 6.1% y/y in Q3 2014 from 6.5% the previous quarter. The data, which was released by the NBS at the weekend and which we quote at constant market prices, give the impression that the economy is moving in the wrong direction.


Once again we have to make the distinction between two different economies.


The oil sector contracted by -3.6% y/y in Q3, compared with growth of 5.1% in Q2, and has now contracted by an average of -8.4% over the past eight quarters. In sharp contrast, the non-oil economy expanded by 7.3% y/y, compared with 6.6% in Q2, and has now grown by an average of 9.0% over the same period.


The NBS commentary puts average crude oil output at 2.15 mbpd in Q3, compared with 2.21 mbpd the previous quarter and the 2014 budget assumption of 2.39 mbpd. 


We have often noted the choice of data sources for crude output. It may be significant that the federal finance ministry has initially proposed an assumption of 2.27 mbpd for the 2015 budget.   


At this point the IMF’s growth forecast for 2014 of 7.0%, as well as our own of 6.8%, looks challenging even when we allow for the fact that the fourth quarter tends to be the strongest.


The next step to double-digit growth requires heavy investment in the power industry and other infrastructure, the re-establishment of security across the country, the relaunch of the reform programme after the elections scheduled for February and a recovery in global demand.    


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