September 03, 2019 / 12:12PM / by ARM Research
/ Header Image Credit: NBS
Data released by NBS revealed the Nigerian economy expanded by 1.94% for the second quarter of 2019, deviating from our estimate of 2%. A slowdown from the revised Q119 GDP of 2.1% (previously: 2.01% due to a revision in oil output). Improved activities in the services, Agric and Oil sectors spearheaded the growth picture this quarter, while trade and Manufacturing sectors contracted.Overall the Non-oil sector expanded by 1.6% YoY, while oil sector expanded by 5.2% YoY.
To begin, the services sector expanded 2.9% YoY, a reflection of improved activities in telecommunications sector (ICT). Clearly, subscriber growth observed from both the data users (29.5% YoY) and voice calls ( 7.3% YoY) fueled the momentum with total subscribers at the end of Q2 19 printing at 173.8 million. Elsewhere, the exit of the real estate sector from recession was short lived as the sector contracted by 3.8% YoY. On other front, the oil sector exited recession this quarter, expanding by 5.2% YoY, a fallout of improved production and low base in the prior year. That said, crude production printed at 1.98mbpd (Q2 18: 1.84mbpd) augmented by additional production from the Egina Oil field which resumed operations this year. This is further evidenced by an upward revision to Q1 crude production numbers to 1.99mbd (previously: 1.94mbpd).
Dishearteningly, the Agric sector only grew by 1.8% - a moderation from 3.2% reported in Q1 19 reflecting a slowdown in crop production. For us, we believe this stemmed from disruptions to farming activities in April and May by armed bandits in the North which invariably led to shortage of crops and increased food prices in both months as evidenced in inflation numbers. Nonetheless, recent updates from these regions shows there's been improvement in recent months. On the flipside, Manufacturing sector contracted by 0.1% YoY mirroring a slowdown in cement, food and textiles production.
Figure 1: Trend in the real sector growth (YoY)
Source: NBS, ARM Research
For us, while the growth numbers was not surprising, we believe it would only support CBN's posture on fuelling economic growth this year. Nonetheless, we see no room for a cut in MPR over the rest of the year buoyed by looming currency concerns. We believe the focus would be on the use of unorthodox methods to spur growth. Regardless, we retain our growth forecast of 2.2% for FY 19 with support from both oil and non-oil sectors.
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