Solid Growth in Household Consumption Due to Base Effects


Tuesday October 26, 2021 / 12:03 PM / by FBNQuest Research/ Header Image Credit:  FBNQuest 


Our chart below is drawn from the NBS' most recent data on the GDP by expenditure approach. The chart shows the y/y growth trends of the various components of expenditure GDP which is computed on the basis of aggregate sums of money spent within an economy. The data is not seasonally adjusted. We see from our chart that household consumption expenditure (HCE), the largest component of (expenditure) GDP grew 48% y/y in Q2 '21, after increasing by 44% y/y in Q1 '21. Although the growth in HCE is the strongest in recent times, it was primarily a recovery from the contraction in household spending in Q2 '20 (HCE fell -18.0% in Q2 '20). Sequentially, we see that HCE declined by -5.5% q/q.


HCE's share of real GDP rebounded from a low of 52% in Q2 '20 to 73% in Q2 '21. Its recovery can also be linked to activity sectors (within the production/output GDP measure), such as trade, and manufacturing, which expanded by 22.5% y/y and 3.5% y/y respectively. The food, beverage & tobacco manufacturing segment was up 4.9% in Q2.


After declining for three quarters in a row (Q2 '20 to Q4 '20), gross fixed capital formation (GFCF), mostly net investments in capital / fixed productive assets, increased by 3.6% in Q1 '21, and by 8.2% in Q2 '21, indicating a gradual pick-up in output growth. GCFC contributed c.15% (c.14% Q2 '20) to real GDP and is the second-largest component.


The -74% y/y decline in net exports in Q2 is due to a combination of a -32% y/y drop in exports and a 51% y/y increase in imports. The gap for the net export line in the chart below is for Q1 '21 when net exports were negative (-NGN378bn), making the y/y growth meaningless.


Export of crude oil which accounts for over 80% of Nigeria's merchandise exports have been disappointing this year. According to OPEC figures, Nigeria's crude oil output (excluding condensates) has hovered around 1.4 million barrels per day (mbpd) over 9M '21, below its production quota of c.1.55mbpd.


The substantial rise in general government expenditure in Q2 '20 of about 150% y/y reflects the stimulus injections into the economy in the aftermath of the COVID-19 pandemic. The stimulus infusions have since been tapered as depicted by the -54% y/y decline of the component in Q2 '21. 


Moving ahead, we expect the growth momentum to be sustained into Q3 as the HCE growth trend gradually recovers to pre-pandemic levels.


Trends in y/y growth of components of GDP by expenditure approach (%)

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Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research

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