The oil and gas sector extended its contraction into the 9^th consecutive quarter. It continued to underperform the broader economy, declining 11.8% y/y due to weaker average daily crude production of 1.43mbpd (-4.0% q/q and -29.2% y/y) below the OPEC+ quota of 1.8mbdp. The sustained downturn in the sector remains underpinned by perennial concerns of oil theft and pipeline vandalism, and years of underinvestment in upstream infrastructure are beginning to weigh on output. The non-oil sector remains the key driver of the nation’s growth, although moderating to 4.8% y/y in Q2-2022 versus +6.7% y/y in Q2-2021. The sector was driven in Q2-2022 mainly by Information and Communication (Telecommunication) (+7.7% y/y); Trade; Financial and Insurance (Financial Institutions) (+18.5% y/y); Transportation (Road Transport) (+56.4% y/y); Agriculture (Crop Production) (+1.54% y/y) and Manufacturing (Food, Beverage & Tobacco) (+5.1% y/y), accounting for positive GDP growth. The agricultural sector moderated from +3.2%y/y in Q1-2022 to +1.2% y/y and declined by 3.2% q/q. Although moderate, the growth in the sector reflects the positive impact of sustained CBN intervention in the sector (cumulative disbursements in Q2-2022 amounted to N744.32 billion for 678 agro-projects) and increased commercial private sector presence. However, insecurity challenges continue to hamper output and discourage farming activities in the sector. The manufacturing sector also moderated from +5.9%y/y in Q1-2022 to +3.0% y/y and declined by 15.5% q/q. With the widespread adoption of consumer credit and sustained interventions from the CBN, N123.1bn was disbursed for brown and green field projects in Q2-2022, bolstering growth in the sector.

Overall, we are more optimistic about economic growth for the Nigerian economy. We expect the non-oil sector to remain at the forefront of economic growth led by the Services and Agricultural sectors. Due to the positive surprise of Q2-2022 and renewed optimism for the rest of the year, we raise our FY-2022E GDP growth forecast by 1.0ppt to 3.9%. Our growth forecast is higher than the IMF’s and World Bank’s forecast of 3.4%.