November 27, 2023/InvestmentOne Report
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- According to the data released by the National Bureau of Statistics (NBS), Nigeria s Gross Domestic Product (GDP) continued its upward trajectory in Q3 2023. In specifics, Nigeria s economy expanded in real terms by 2.54% y/y in the third quarter of the year, up marginally by 3bps relative to Q2 2023. As recorded in previous quarters, the non-oil sector remained the major driver of Nigeria s economic growth momentum while the contraction in the oil sector narrowed in the quarter under review.
- Although it remained in contraction, the oil sector performance improved in Q3 2023, as it contracted by 0.85% y/y, as compared to the 13.43% y/y contraction posted in Q2 2023. This can be largely attributed to the improvement in crude oil production numbers in the quarter under review. According to the National Bureau of Statistics (NBS), relative to Q2 2023, daily average crude oil production numbers averaged higher in Q3 2023 by 18.85% to 1.45mmbpd. Recall that in the corresponding quarter of 2022, daily average crude oil production averaged at 1.20mmbpd.
- Annual growth rate in the non-oil sector moderated by 84bps to 2.75% y/y in Q3 2023 relative to the prior quarter, growing at its slowest pace since Q1 2021. When compared to Q3 2022, non-oil sector performance declined by 152bps, reflecting the adverse impact of the current macro-economic headwinds in the economy. For context, inflation rate rose from 22.79% in June 2023 to 26.72% in September 2023, as food inflation reached an all-time high of 30.64% in September. Energy prices also soared, amidst policy reforms by the new administration, hampering business activities.
- We opine that the non-oil sector would continue to be the key driver of Nigeria s economic growth momentum, supported by an expected resurgence in the oil sector, as the federal government remains committed to tackling crude oil production encumbrances. We expect the oil sector performance to remain in contraction, albeit marginal, in Q4 2023 despite improved crude oil production. This is considering the base effect as Q4 2022 posted a contraction of 13.38% y/y vs. the lower 22.67% which Q3 2023 bounced off from. We however expect a return to growth in the sector’s performance in the medium term.
