Q3 2017 GDP: Going Beyond the Surface Figures


Tuesday, November 21, 2017 7:31AM/ Proshare Research 


In line with earlier expectation, the National Bureau of Statistics, Nigeria made available GDP figures for the third quarter of 2017 in a follow up to second quarter 2017, whereby there is a revision to the GDP figure for Q2 . In an  attempt to provide a holistic picture of second quarter GDP account, GDP growth rate in the second quarter of 2017 experienced an upward revision from 0.55% to 0.72%. 

Output from Nigeria’s national petroleum company   was responsible for the upward revision in Q2 2017 GDP number. The new dynamic was on the back of 8.97% growth in oil GDP. 

Third quarter 2017 growth figure came in strong at 1.4% as it beats most market estimates. The Nominal GDP and Real GDP were valued at N29.83 trillion and N 18.03 trillion respectively at the end of the third quarter of 2017. 

Fig 1: GDP Growth Rate from 2016 to 2017
Proshare Nigeria Pvt. Ltd.
Source: NBS 

Oil production during the period under review, stood at 2.03 million barrels per day compared to the second quarter 2017 revised figure of 1.87 million barrels per day. Reflective of 8.5% and 26% growth compared to the previous and corresponding quarter. 

As we gradually reach pre-recessionary levels that real GDP in the oil sector has grown by 25% compared to the previous quarter. Putting oil sector’s contribution to GDP at 10.04% compared to the 8.09% in the previous quarter. Non- oil sector grew from 90.96% in second quarter 2017 to 89.96% in the third quarter of 2017. 

In reaction to the non-oil sector still in the downward trough, the sector’s contribution to GDP has diminished by 1.78% prior to the recession. Obviously the oil sector has recovered earlier lost ground. However, the non-oil sector   has not recovered from earlier cyclical shock.  

Fig2: Contribution to GDP
Proshare Nigeria Pvt. Ltd.
Source: NBS

Beyond The Figures
As earlier mentioned, the third quarter 2017 GDP figures beat market estimates, which is also cheery to note that there is uplift in the cycle. However, at the same time the figures also mask structural weakness in the economy which could be deceptive. The growth is largely oil induced, with most of the other sectors of the economy either still stuck into a bloodletting position or recently drawn into a bloodletting position 

Fig 3: Growth Across Sectors
Proshare Nigeria Pvt. Ltd.
Source: NBS

The slowdown in the growth of discretional items such as food and textiles suggest lean consumption as firm struggle to manage stock.  Sectors such as information technology, transportation and accommodation which were resilient in period of negative downturn are already displaying weakness as they seem to be running out of growth. Moreover the 49% slump in oil refining in the third
quarter of 2017 do add to the concern as it can influence our balance of payment negatively. 

Even though, exchange rate stability has been achieved, output accrued from the Finance and Insurance sector slumped by 5.96% in the 3
rd quarter of 2017. Slumps in the said sector do raise a red flag and calls for caution.  Repeated slump in the Finance and Insurance sector could pose as a threat to financial stability, thereby triggering a capitulation in the cycle.  

Certainly, improved oil production and price have provided a scaffold for uplift for the cycle, regardless growth remains largely vulnerable to possible cyclical headwinds.  It leaves the external economy in a more export concentrated position, with export injection more than ever before vulnerable to cyclical shocks.

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