February 24, 2020/Cordros Report

Nigeria’s economic growth momentum remained broadly positive in Q4-2019, as GDP grew by 2.55% y/y (vs. 2.28% y/y in Q3-19), the highest quarterly figure since Q3-2015. For 2019FY, economic activities expanded by 2.27% y/y (vs. 1.19% y/y in 2018FY). According to the breakdowns provided, while the Non-Oil sector (2.26%y/y vs. 1.85% y/y in Q3-19) continued to show resilience, the Oil sector expanded, albeit at a slower pace of (+6.36% y/y) when compared to the prior quarter (+6.49% y/y).

Favourable Base Effect Continues to Support Oil GDP Growth

In our 2019FY outlook, we had argued that the Oil sector will sustain the growth momentum witnessed in Q3-19, albeit at a slower pace as the favourable base effect dissipated. True our prognosis, Oil GDP recorded a slower growth of 6.36% y/y (vs. +6.49 y/y in Q3-19), on account of the moderation in crude Oil production (+4.71% y/y vs. +5.25% y/y in Q3-19).

The Non-Oil Sector Remains Resilient

The Non-Oil sector (2.26%y/y vs. 1.85% y/y in Q3-19) surprised positively, as a sharper expansion in the Services GDP (4.01% y/y) and faster than projected growth in the Manufacturing GDP (+1.24% y/y) had a positive passthrough impact on the sector. Also, the Agriculture sector grew by 2.31% y/y.

Slower Growth Projection for Q1 2020

For Q1-20, we project a marginal growth in the Oil sector, on account of; (1) high base from the corresponding period in the prior year and (2) our expectation of compliance with OPEC’s production allocation to Nigeria. Nevertheless, we project crude Oil production inclusive of condensates at 2.03mb/d, which translates to a growth estimate of 0.78% y/y.  

For the Non-Oil sector, we expect growth to remain positive, albeit at a slower pace of 2.10% y/y. In summary, having modeled our expectation across both the Oil and Non-Oil GDP, factoring upside and downside risks, we project growth of 2.10% y/y for Q1-2020.

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