May 24, 2022/CSL Research
Based on the recently released Q1 2022 numbers, Nigeria’s Gross Domestic Product (GDP) grew by 3.11% y/y in real terms in the first quarter of 2022 (Q1 2022), sustaining positive growth for the sixth consecutive quarter since the recession in 2020 when output contracted by 6.10% and 3.62% in Q2 and Q3 respectively, at the heat of the Covid-19 pandemic.
Again, growth was driven by the non-oil sector (+6.08% y/y), while the oil sector remained uninspiring (-26.04% y/y). The growth in the non-oil sector outperformed expectations, and heavy-weight sectors like trade (+6.54% y/y) and ICT (+12.07% y/y) subsectors were the main drivers. While the growth in the trade sector could reflect improved domestic demand arising from complete removal of movement restrictions, it also benefitted from a low base in the prior year (Q1 2021: -2.43% y/y). Also, the ICT sector growth of 12.07% was mainly supported by the telecommunications sector (+14.50% y/y) given the continued demand for data and digital services.
The oil sector contracted deeply (-26.04%y/y) despite a better average price of Brent Crude in Q1 2022 compared to Q4 2021 and Q1 2021, due to low production. Brent crude averaged US$97.86/bbl in Q1 2022, compared to US$79.66/bl in Q4 2021 and an average price of US$61.32/bl in Q1 2021. Meanwhile, the NBS pegged average daily oil production for Q1 2022 at 1.49mbpd, lower than that of 1.50mbpd in Q4 2021 and 1.72mbpd in Q1 2021. The uninspiring output was largely due to crude oil terminal maintenance, shutdowns, theft and reduced investments. With the perennial issues affecting oil production in the country, we struggle to see any recovery in the near term. The passage of the PIB that should have incentivized investments into the sector appears ineffective considering the reintroduction of the subidy regime which goes against the dictates of the PIB, has made the space unattractive for investors. The oil sector contributed 6.63% to real GDP in Q1 2022.
The non-oil sector grew by 6.08% in real terms in Q1 2021, 1.34% higher than Q4 2021. Growth in the sector in the first quarter of 2021 was driven mainly by Trade; Information and Communication(Telecommunication); Agriculture (crop production); and Financial and Insurance (Financial Institutions) and Manufacturing (Food, Beverage & Tobacco).
The nonoil sector contributed 93.37% to the nation’s GDP in Q1 2022 in real terms. Growth in the agricultural sector settled at 3.16% in Q1 2021 compared to 3.58% in Q4 2021. The subdued output continues to reflect the persistent security challenges and its effect on food production in the country despite CBN’s monetary interventions. Still, we expect the sector to remain resilient through the year, receiving respite from CBN Agro interventions.
Likewise, the Manufacturing sector remained resilient, rising by 5.89% in Q1 2022 compared with 2.28% in Q4 2021 and 3.40% in Q1 2021 even as the negative impact of the oil refining subsector has continued to drag performance. We believe the level of growth seen will be weighed against increasing inflation amidst current global trends at the MPC meeting ending today
