Wednesday, February 28, 2018 / 01:08 PM / Proshare Research
Introduction: Upshot in Price deflator
The Nigerian economy sustained its expansionary path at the end of last quarter of 2017. As Basic gross domestic product (GDP) rose from 1.4% in Q3 2017 to 1.92% in Q4 2017, thus adding o.52 in upward momentum. The market based GDP rose from 1.43% in Q3 2017 t0 1.87% at the end of Q4 2017. Though market based growth gained 0.44% to its previous levels.
However, its growth levers were weighed down by 2% increase in price deflators.
Therefore, the acceleration in implied price deflator weighed a bit on market priced GDP.
The pricing of such forced market based GDP to lag behind basic GDP, basic and market priced GDP achieved a full year growth of 0.83% and 0.81% respectively
Fig 1: Basic and Market Price GDP
Sticking to Basics Alone: Did You Mean Basic GDP? Yes
Apart from the swell in momentum experienced in basic GDP by 1.92% in the last quarter of 2017, growth in the same quarter was more dispersed compared to the previous quarter of Q3 2017.
The non-oil sector grew a by 1.45 % in the period under review compared to- 0.72% dip in the previous quarter of 2017. Eventually, returning the non -0il sector back to positive growth levels, as it reach its highest growth when compared to the last eight (8) quarters.
The oil sector sustained its positive spell as it grew by 8. 8% at the end of Q4 2017, regardless such growth was a shadow of the Q3 2017: whereby the oil sector grew 25.5%. Expectedly the oil sector was coming from a high base, thus diminishing marginal return was expected to set in at some point.
Prior to reaching that point, oil production fell from 2.1 million barrels/day in the previous quarter to 1.9 million barrels/day in Q4 2017: Obviously affecting the economics of scale within the sector, negatively.
Fig 2: Oil production per day
The improvement in the non-oil sector, provided the needed support for output, thus acting as a cover to the prune down in the oil sector. Obviously reversing the earlier growth dynamic witnessed in Q3, where growth was purely oil induced.
Sector Wide: Who Brought What?
The Agricultural sector grew by 4.23% at the end of the Q4 2017 compared to 3.06 % growth in the previous quarter, the improvement was on the back of 4.58% growth in crop production.
The output dip in the crude and petroleum sub-sector weighed heavily on the Quarrying and Mining sector. The trickle-up effect was a slump in growth from 25.44% in Q3 2017 to 7.96% Q4 2017 in the sector.
Fig 3: Growth Across Sectors
The manufacturing sector grew by o.14%, marginally slipped out of the negative zone. Regardless, the consistent dampening in the refining sub- sector by -45% remains an Achilles heel to the sector as a whole.
Those sectors tagged as utility driven such as electricity and water supply maintained their upward trajectory. At the end of the last quarter the electricity and water supply sector grew by 1.23% and 4.14% respectively
Construction sector grew from -0.46% in Q3 2017 to 4.4% in Q4 2017, regardless weak capital spending by government remains a downside to the sector. For instance capital spending by the central government in the Q 4 2o17 stood at 9.7% of total spending.
Sectors such as transport, accommodation and entertainment were affected positively by the seasonality effect. Expectedly, such effect led to a positive growth in accommodation as it reversed earlier negative growth of -1.74% in Q3 2017 to 2.8% in Q4 2017. In the same vein individual sectors such as transportation and entertainment sector grew by 16.57% and 3.54% respectively.
The trade sector was supported by the stability in the exchange rate coupled with festivities that come with the last quarter. The dynamic lifted output in that particular sector from -1.74% in Q3 2017 to 2.07% in Q4 2017.
The financial and insurance sector grew marginally by 0.22% at the end of Q4 2017; the capitulation from earlier negative growth to positive growth level was solely driven by a 2.61% expansion in the financial sector. The recent development in the financial sector punctures fears of possible financial instability.
At the same time, sectors such as administrative and professional services were in the green zone as they grew by 2.16% and 0.64% respectively at the end of Q4 2017.
In particular, the individual sectors of real estate, information communication, education, public administration and human and social services remained within the bloodletting zone.
Conclusion: Where Do We Stand?
The growth level of 1.92% at the end of Q4 2017, spurred full year growth. To beat the international monetary fund (IMF) full year growth forecast of 0.8% for 2017, marginally.
Moreover, as growth take on a broader shape, with the manufacturing and financial sectors shooting green lights, such development brushes off earlier cautious sentiment. One is tempted to admit we are fully on course, but however?
Fig 4: 2017 GDP Peer comparison
Source: IMF, World bank
It is worth bringing to notice that Nigeria churned out the lowest growth among the likes of South Africa, Brazil and Russia which was previously in a recession cycle. Thereby Nigeria broke out of the recessionary cycle with the least momentum compare to the others.
Nigerian’s present economic growth level is below every growth average, which is inclusive of Nigeria output in its basket. Therefore the economy is growing lower than most economies in the world, leaving individual per capital income of the citizenry without any positive impact.
Thus, growth has emerged but the widening base of the pyramid is still on-going.
Although the Nigerian economy has gone further ahead of the needed turning point, however earlier growth spells remain elusive.
The persistent dampening in sectors such as information communication and the real estate coupled with prolonged shrinking in the refining sub-sector is a substantial drag on the economy.
Obviously, the growth picture depicts a glass that is below half empty; in reality the necessity to provide the right pre-condition for a more robust growth keeps mounting day by day.
7. Nigeria: Non-oil economy in the driving seat