Wednesday, November 18, 2015 6:53 PM / NBS
Total expenditure on GDP measured in real terms increased by 2.30 percent (year-on-year) in Q2 of 2015* while year on year nominal changes indicated an increase of 5.12 percent in the quarter. Final consumption expenditure of households accounted for the largest share of expenditure at 74.04 percent of total expenditure on GDP at nominal market prices, an increase on both the previous and Q2 of 2014.
Final consumption expenditure of households recorded a nominal growth quarter-on-quarter of 8.78 percent and strong year-on-year growth of 14.70 percent. In real terms, Final consumption expenditure of households recorded year-on-year and quarter-on-quarter growth rate of 11.79 percent and 0.96 percent respectively.
Representing 5.87 percent of the total expenditure on nominal GDP, General Government final expenditure decreased year-on-year by 11.81 percent. In real terms this decrease was more pronounced; general government final expenditure fell by 14.83 percent relative to Q2 2014, and by 10.75 percent relative to its level in the previous quarter.
Nominal expenditure on Gross Fixed Capital Formation (Investment) increased on the year, but by a smaller degree than in the first quarter of 2015. Investment in non-residential buildings was the main driver in growth for the second quarter of 2015; other components such as transport equipment and machinery saw declines. These trends were mirrored in real terms.
Net exports of goods and services accounted for 2.85 percent of nominal GDP at market prices, a decline from 7.77 percent in the same quarter of the previous year. Exports declined by 37.61 percent over this period; a decline only partially counteracted by the 24.31 percent decline in imports.
Accordingly, whereas the net export balance remained positive, the gap between the value of exports and the value of imports narrowed.
Compensation of Employees (COE) returned to growth of 0.11 percent year on year in nominal terms, after the decline of 2.49 percent in the first quarter of 2015. In real terms however, COE declined by of 8.11percent.
National disposable income grew in nominal terms by 6.09 percent (year on year) in Q2 2015. During this period, household consumption accounted for 77.68 percent of national disposable income and 15.87 percent of income was devoted to savings, which was higher than in the previous quarter but lower than the corresponding quarter of last year.
GDP by Expenditure
The Gross Domestic Product (GDP) can be derived as the value of all goods and services available for final uses and export. The expenditure approach measures the final uses of the produced output as the sum of Final consumption, Gross Capital Formation and Exports less Imports.
GDP at current market value of goods and services in Nigeria (nominal) increased by 5.12 percent, from N 21,957.45 billion in the sec-ond quarter of 2014, to N23,080.91 billion in the second quarter of 2015. This growth rate was higher than the previous quarter, but lower than the average growth rate in 2014. To a large extent, this reduction has been driven by the recent fall in oil prices, which has de-creased Nigeria’s net exports.
At basic prices (not including taxes and subsidies) GDP grew by 5.17 percent. Net taxes on products (taxes less subsidies) have been rising less quickly, and less consistently than GDP at market prices, which means that the difference between basic price and market GDP has been decreasing.
This trend continued in the most recent period: net taxes fell by 0.39 percent relative to the second quarter of 2014, which explains why growth in basic price GDP was slightly higher than growth in market price GDP Expenditure on GDP in real terms (at 2010 prices) stood at N16,623.05 billion in the second quarter of 2015, compared with N16,249.37 billion recorded in the corresponding quarter of 2014, representing a growth rate of 2.30 percent.
This is the lowest growth in real GDP recorded since 2011; growth in the same period in 2014 was 6.47 percent.
Analysis of Growth of Expenditure components
Although growth in total GDP grew by 5.12 percent in nominal terms between 2015 Q2 and 2014 Q2, this hides differing trends in the growth rates of its components.
Figure 2 shows the contributions that each expenditure component made to year on year GDP growth. These are calculated as the growth of each component weighted by their importance to GDP, so that the sum of the bars in each quarter is equal to the growth rate in GDP.
It reveals that for most quarters, household consumption is an important driver of growth. However since the last quarter of 2014, this has been counteracted by net exports, which have been a drag on growth. In addition, government consumption has contributed negatively to growth, but to a lesser extent, due to a smaller contraction.
In the second quarter of 2015, crude oil accounted for 73.68 percent of the value of all merchandise exports (see Foreign Trade Statistics Q2 2015 for more detail).
Therefore the dramatic fall in oil prices, which began in the Third quarter of 2014, necessarily had a large effect on this component of expenditure, and helps to explain why net exports have been negative since this time.
The price of crude oil nearly halved between the third quarter of 2014 and the second quarter of 2015.
Oil revenue also accounts for a large portion of government revenue, which could also explain why govern-ment final consumption contributed negatively to growth.