November 28, 2023/CSL Research
Based on the Gross Domestic Product (GDP) report published by the National Bureau of Statistics (NBS) on Friday last week, Nigeria’s GDP grew by 2.54% y/y in real terms in Q3 2023. This growth rate is higher than the 2.25% recorded in the third quarter of 2022 and marginally higher than the 2.51% reported in Q2 2023.
Though the non-oil sector remained the major driver of the economy, contributing c. 94.52% to total GDP compared with the oil sector which contributed only 5.48%, the non-oil sector’s growth slowed in Q3 to 2.75% compared with 3.58% in Q2 2023. On the other hand, the oil sector showed significant improvement contracting by a modest -0.85% y/y in Q3 2023 compared with -13.43%y/y recorded Q2 2023 and will likely return to growth in the next one or two quarters.
The services sector, which has been the major driver of Nigeria’s GDP in recent years, recorded growth of 3.99% and contributed 52.70% to the aggregate GDP. The agriculture sector contributed 29.31% and grew by 1.30%, a marginal drop from the growth of 1.34% recorded in Q3 2022. We expect growth in the agricultural sector to remain subdued as insecurity issues persist in the food producing regions and weather conditions remain unpredictable.
The industry sector grew by 0.46%, a significant improvement on the -8.00% recorded in Q3 2022 and the sector contributed 18% to the total GDP. The agriculture, and the industry sectors’ contribution to the aggregate GDP in Q3 2023 was slightly lower (47.3%), compared to Q3 2022 (48.04%). In Q3 2023, aggregate GDP was N60.7trn in nominal terms, a 16.1% growth compared to N52.3trn in Q3 2022.
Average daily oil production improved to 1.45mbpd (Q3 2023) from 1.20mbpd (Q3 2022) and 1.22mbpd in Q2 2023 and this contributed to the observed improvement in the oil sector which contracted slightly by -0.85% y/y in Q3 2023 compared with -13.43%y/y recorded in the prior quarter and 22.67% recorded in the corresponding quarter of 2022.
With sustained improvement in oil production, the oil sector will likely record growth in the next one or two quarters. The manufacturing sector’s growth has been extremely modest, reflecting the negative impact of CBN’s hawkish stance. In fact, the sector contracted by 1.91% in Q3 2022, the first contraction since covid hit in 2020.
Though at a slower pace, the CBN has maintained its hawkish stance, and the fortunes of the sector have worsened with the latest reforms of the new administration such as the fuel subsidy removal and the unification of the exchange rates at the various windows. In Q3 2023, the sector recorded marginal growth of 0.48% compared with 2.20% y/y in Q2 2023.
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