August 25, 2020/Cordros Report

Nigeria’s economy contracted by the most in at least a decade in Q2-20 as lower oil prices and production and COVID-19 induced disruptions weighed down output. Real GDP contracted by 6.10% y/y (vs. growth of 1.87% y/y in Q1-20 and 2.12% y/y in Q2-19) compared to our estimate and Bloomberg consensus median estimate of a drop of 2.87% and 4.05% respectively. Quarter on quarter, real GDP declined by 5.04%. We maintain our estimate for Q3-20 and revise 2020FY growth down to -1.88%.

Lower Production Drags Growth in the Oil Sector

Crude oil production (1.81mb/d) during the quarter was the lowest since Q1-17 (1.75 mb/d). Specifically, the 1.81mb/d oil production during the quarter was 12.6% and 10.4% less than oil production in Q1-20 (2.07 mb/d) and Q2-19 (2.02 mb/d) respectively. This was majorly a result of compliance with the OPEC production cut agreement to keep oil prices stable after the COVID-19 induced oil price decline.

Non-Oil Sector Bows to COVID-19 Induced Lockdown Measures

Activities in the non-oil sector were dampened by restrictions and shelter-in-place mandates put in place to combat the spread of COVID-19. The non-oil sector plunged by 6.05%, representing the first contraction since Q3-17 (-0.78% y/y). Across the Sectorial components, we note that except for the Agriculture sector (+1.5% y/y) which grew during the quarter, the Industries (-12.05% y/y) and Services (-6.78% y/y) sectors declined. 

Having factored in the upside and downside risks across both Oil and Non-Oil GDP, we project negative growth of 1.85% in Q3-20 and revise our 2020FY GDP growth estimate to -1.88%.
 

Click here to read full PDF copy of report