November 24, 2023/Coronation Report

The national accounts for Q3 ‘23 by the National Bureau of Statistics (NBS) show that GDP grew by +2.54% y/y compared with the +2.51% y/y recorded in Q2 ’23. The sluggish growth reflects current economic headwinds as well as the residual impact of the PMS subsidy removal and fx liberalisation. Surprisingly, GDP grew by +9.7% on a q/q basis. A deeper dive shows that agriculture grew by +39.7% q/q. We suspect that the harvest season which kicks off in Q3 contributed to the healthy q/q growth recorded for agriculture.

• Oil’s formal share of real GDP was 5.48% vs 5.34% recorded in Q2 ‘23. The sector recorded negative growth for the 14^th consecutive quarter, contracting by -0.85% y/y in Q3 ’23. This is a significantly slower contraction when compared with -13.4% recorded in the previous quarter. Based on data from the NBS, average crude oil production in Q3 ’23 was 1.45mbpd compared with 1.20mbpd recorded in the previous quarter. The improvement in crude oil production can be partly attributed to FGN’s efforts towards curbing oil theft and pipeline vandalism.
• The non-oil economy grew by 2.75% y/y in Q3 ’23 compared with 3.6% y/y recorded in Q2 ’23. Key drivers within the non-oil economy include, finance and insurance (28.2% y/y), telecoms (7.7% y/y), construction (3.8% y/y), real estate (1.9% y/y), trade (1.5% y/y), and agriculture (1.3% y/y). Combined, these sectors accounted for 71% of total GDP in Q3 ’23.
• Agriculture grew by 1.3% y/y compared with 1.5% y/y recorded in Q1 ’23. Crop production remained the major driver of agriculture and accounted for 89.9% of agriculture GDP; it grew by 1.35% y/y. The forestry and livestock segments grew by 2.21% y/y and 1.18% y/y respectively. However, the fishing segment recorded a contraction of -2.33% y/y. Agriculture contributed 29.3% y/y to total GDP in Q3 ’23.
• Telecommunications grew by 7.7% y/y vs 9.7% recorded in Q2 ’23 and accounted for 18.9% of total GDP in Q3 ’23. Given the growing availability and affordability of smartphones, there has been a surge in internet usage which has contributed to increased demand for data services, mobile applications, and online content, driving revenue growth for telecommunications companies.
• The manufacturing sector grew by 0.4% y/y vs 2.2% y/y recorded in Q2 ’23. Within the sector, the food, and beverages segment grew by 0.9% y/y and accounted for 49% of total manufacturing GDP. Meanwhile, textile, apparel, and footwear segment contracted by -2.7% y/y. The cement segment posted growth of 4.2% y/y.
• Trade grew by 1.5% y/y in Q3 ’23 vs 2.4% y/y recorded in the preceding quarter. Ideally, fx depreciations result in increased attractiveness of exports while imports become relatively expensive. The fx liberalization policy should impact the balance of trade account by stimulating export growth and curbing imports.
• Finance and Insurance grew by 28.2% y/y in Q3 ’23 compared with 26.8% y/y recorded in Q2 ’23. Meanwhile, on a q/q basis it contracted by -9.2%.
• We expect to see modest growth in Q4 ’23 GDP figures, partly due to a seasonal boost from end- year festivities.