December 2, 2022/Coronation Research
The latest national accounts released by the National Bureau of Statistics (NBS) show that GDP grew by 2.3% y/y in Q3 ‘22 compared with 3.5% y/y in Q2 ’22.
Meanwhile, on a q/q basis, it grew by 9.7%, reflecting increased economic activity compared with the q/q contraction of -0.4% recorded in the preceding quarter.
The y/y moderation in growth can be partly attributed to base effects, the trickle-down effect of the Russian-Ukraine crisis impacting the prices of deregulated petroleum products (such as diesel and aviation fuel), select manufacturing inputs, and the impact of recent monetary policy rate hikes aimed at combating high inflation. The oil economy contracted by -22.7% y/y in Q3, compared with -11.8% y/y recorded in Q2. Meanwhile, the non-oil economy grew 4.3% y/y in Q3 ’22 compared with 4.8% y/y in Q2 ‘22.
Over the past ten quarters, the oil economy has contracted by an average of 13.4% y/y. We note that, Bonny light declined by -27.2% q/q from USD126.9/b at end-June ’22 to close at USD92.4/b at end-September ’22. Oil prices continue to be influenced by the Russia-Ukraine crisis, and relatively tight supply. However, concerns around slowdown in growth in select advanced economies and recurring COVID-19 lockdowns in China continue to exert downward pressure on oil price. According to the latest monthly OPEC
report, production in October ‘22 averaged 40.4mbpd. This is below the 43.9mbpd OPEC target for October. Bonny Light stood at USD87.4/b as at 24 November ’22.
Based on data from the NBS, average crude oil production (condensates inclusive) in Q3 was 1.20mbpd compared with 1.57mbpd in the previous quarter and 1.43mbpd in Q2 ‘21. This is lower than the OPEC production quota for Nigeria which was 1.8mbpd and the FGN’s production benchmark of 1.6mbpd.
According to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), in Q3 ’22, crude oil production (condensates inclusive) declined across some terminals such as the Bonny (-86.2% y/y), Brass (-79.6% y/y), Forcados (-66.3% y/y) and Escavros (-3.3% y/y). The decline in oil production can be attributed to shut-ins due to crude oil theft, vandalism, prolonged repairs, workers’ strike, low investment, and poor infrastructure. The divestments by international oil companies of their onshore assets also contributed to the underperformance. Overall, the oil sector contributed 5.7% to the total GDP in Q3 ‘22.
Within the non-oil economy, agriculture grew by 1.3% y/y in Q3 compared with the 1.2% y/y recorded in the preceding quarter. Agriculture accounted for 23.2% of total GDP in Q3 ‘22. The sector’s performance can be partly hinged upon CBN-led interventions within the sector.
We note that collective disbursement under the CBN’s Anchor Borrowers’ Program (APB)as at October ’22 is c.N1.1trn. The funds were disbursed to c.4.6 million smallholder farmers cultivating 21 commodities across the country. Crop production remains the primary driver of growth within the agriculture sector. The segment accounted for 93% of agriculture GDP and grew by 1.3% y/y.
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