August 31, 2016/Cordros Research

The National Bureau of Statistics (NBS) just released Nigeria’s Q2-2016 GDP growth estimate. Real GDP growth came in at historic negative of 2.06% (the biggest since -7.59% recorded in Q1-2004). Having already contracted in the first quarter, the negative growth in Q2  confirms the economy is in recession (the first since 2004).

A quick look at the breakdown of the GDP figure shows that the oil sector recorded a negative growth of 17.48% (from -1.89% in Q1-2016 and -6.8% in Q2-2015) while output in the non-oil sector declined by 0.38% (from -0.18%in Q1-2016 and a growth of 3.46% in Q2-2015). Overall, the significant contraction in the oil sector GDP (the biggest since -14.47% in Q3 2013) largely accounted for the -2.06% national output growth. The non-oil sector marks its first recession since 2004 while the oil sector marks the third straight negative growth since Q4-2015.

Over the three months period, output from the oil sector was negatively affected by the record fall in domestic production as a result of several militants’ attacks on crude oil & gas facilities.

The non-oil sector on the other hand suffered from (1) protracted constraints in accessing foreign exchange and (2) slowdown in business investment decisions — occasioned by the delayed passage of the 2016 budget. These were in addition to systemic issues such as lingering fuel supply shortages, significant drop in electricity power outage, manufacturing under-utilization occasioned by limited access to forex and weak consumer demand, as well as the rampaging activities of the Fulani herdsmen (adding to insecurity concerns) in some parts of the country.

A quick look at the breakdown of the biggest components of the GDP shows that agriculture grew by 4.5% y/y while trade (-0.03% y/y) and services (-1.86% y/y) contracted.