Expectations for Q2 2018 GDP Growth Consensus vs Outliers Projections


Wednesday, July 18, 2018 11:02 AM /FDC


The GDP growth figure for the second quarter is scheduled to be released on July 30, after the monetary policy committee (MPC) meeting on July 23/24. The real GDP growth trend is usually one of the major considerations in determining the monetary policy parameters. In spite of the positive growth recorded in the last 4 quarters, driven primarily by stable oil production, the pace has remained slow. At 1.95% (Q1’18), Nigeria’s real GDP growth is below its potential of 4.9%.

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In Q2’18, there were some notable economic activities which are likely to have direct and indirect impact on the GDP numbers. The intensity of the herds-men and farmers’ crisis in some of the food producing regions amid planting season is expected to limit agricultural out-put. This will affect the performance of the sector. Nigeria’s oil production also declined in the review quarter, following several disruptions and force majeure implemented on key pipelines such as the Trans-Forcados and Nembe Creek pipelines. 

Nigeria’s oil output dropped from 1.78mbpd in Q1’18 to 1.69mbpd. In addition, average power output from the grid declined marginally by 1.34% to 3,834MWh/h from 3,886MWh/h in the preceding quarter, in spite of the raining season. The average price of diesel fell to N205.01/litre in Q2’18 from N210.04/litre in Q1’18. There were several sys-tem collapses during the quarter, driven partly by gas pipeline ruptures and leakages. 

These factors are expected to impact the growth numbers in Q2. A quick look at some business proxies that are pointers to the level of activity in the economy showed a negative performance. The CBN’s Consumer confidence index which measures the degree of consumer’s optimism remained in the negative region at -6.3%. This coincided with a decline in the Purchasing Man-agers Index (PMI), to a negative territory of 49.8.

The general consensus among analysts is a pick up in the real GDP growth rate within a range of 2%- 2.5%.

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At FDC we are projecting that Q2 growth rate will flatten out at 2% as most output indicators were constrained in the second quarter. Also, the real sector activities remain limited by high cost of funds despite the avail-ability of foreign exchange and stable exchange rate. The services sector on the other hand will continue to be the largest contributor to GDP.


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