May 26, 2017/Cordros Research
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Earlier this week, the National Bureau of Statistics (NBS) released Nigeria’s Gross Domestic Product (GDP) report for the first three months of 2017. The report shows that during the reference period, the economy contracted by 0.52% y/y (in real terms), 77 bps lower than Bloomberg’s compiled median estimate of 0.25%. Having declined throughout 2016, the contraction in the first quarter of 2017 extends the country’s recessionary trend, and marks the fifth successive quarter of negative output growth rate. Compared to the rate recorded in Q4-2016 (revised to -1.73% from -1.30%), Q1-2017 GDP growth rate is ahead by 121 bps, and also higher by 15 bps relative to the corresponding quarter of 2016 (revised to -0.67% from -0.36%). On a quarter-on-quarter basis, real GDP growth was -12.92%. The slowdown in the rate of output contraction during the review period is attributable to the rebound in the non-oil sector – supported by sustained growth in Agriculture (3.39% y/y), modest rebound in Manufacturing (1.4% y/y), and tempered contraction in Services (-0.3% y/y vs. 1.6% y/y and 1.1% y/y respectively in Q4 and Q3-2016). Suffice to say that the economy would have performed better, save for the significant drag from the oil sector (-11.64% y/y) which has remained in the negative growth region for six straight quarters.
Time to Exit Recession
Thus far in the second quarter of the year, leading indicators suggest positive expectation for output growth. April 2017 PMI figures clearly show expansion in manufacturing (51.1) activities while the non-manufacturing sector (49.5) missed growth by a whisker. In addition, the latest edition of the Global Economic Conditions Survey revealed a rebound in Nigeria’s business confidence. We anchor growth in Q2-2017 on recovery in the oil sector (on less disruptive output) and stronger growth in the non-oil sector (on continued improvement in the foreign exchange space, commencement of capital releases, and continued growth in agriculture). Overall, we estimate GDP growth of 1.8% y/y in the second quarter of the year.
