May 22, 2018/Cordros Report
- The domestic economy expanded in the three months to March 2018, according to data released by the National Bureau of Statistics (NBS).
- While it is cheering, on the surface, that the latest data shows expansion in both oil and non-oil sectors, the fact that growth rate in the latter significantly lags the strong double-digit recorded in the former is concerning.
- The implication of non-oil sector fragility for the federal government’s economic diversification drive cannot be overemphasized, considering the need for sound industrial development to drive agricultural entrepreneurship.
- Clearly, more than ever before, there is a need to boost growth in the domestic economy via sound policy reforms – which will grapple with populist reforms considering the complexity of the electoral cycle.
- Market participants, particularly those with a bias for risky assets, had largely factored in the reported output growth into their investment decisions as a lagging indicator.
- The data is equally consistent with our expectation for lower yields in the fixed income market, as it further supports the FGN’s drive to increase the foreign component of its debt profile while reducing domestic supply of debt instruments.
- Following the broadly in-line GDP outturn over Q1-18, we retain our 2.63% 2018FY GDP forecast, implying a projection of 2.70% in Q2-18. That position reflects our thought that the economy will witness little or no structural reforms over 2018. For the avoidance of doubt, our model assumptions are largely unchanged, save for a slight upward revision to our oil price forecast, as discussed in the report.