By Nkiruka Nnorom
RECENT developments in the Nigerian economy where the contraction in the GDP slowed considerably in Q1, 2017 is an indication that the country will likely exit the current recession between Q2 and Q3, 2017, analysts at FSDH Merchant Bank, have said.
This, according to them, in a weekly review of the economy tagged, ‘Nigerian Economy Exiting Recession’ is hinged on the latest data released by the National Bureau of Statistics, NBS, which showed that the GDP contracted by 0.52 per cent, mainly due to the decline recorded in mining and quarrying, and trade sectors which countered the recovery in the non-oil sector of the economy.
The investment banking house stated that a review of the Purchasing Managers Index (PMI) showed that production activities are already picking up in Nigeria, while the improvement in the crude oil production and the expectation that the crude oil price will remain above $50/b should lift the Oil GDP.
The Nigerian economy entered into a recession in Q2 2016 following two consecutive quarters of GDP contraction. The economy contracted further in Q3 2016 and Q4 2016. Thus, the Nigerian economy contracted by 0.67 per cent, 1.49 per cent, 2.34 per cent and, 1.73 per cent in Q1, Q2, Q3 and Q4 2016 respectively. The following factors pushed the Nigerian economy into a recession: drop in crude oil price and production, foreign exchange shortages, non-payment of workers’ salaries in the public sector, low electricity generation and low investors’ confidence in Nigeria.
However, the latest GDP figure showed that the contraction in various sectors of the economy is ebbing as the oil GDP contracted by 11.64 per cent in Q1 2017 compared with the contraction of 17.70 per cent recorded in Q4 2016 and 4.81 per cent recorded in Q1 2016.
The figure indicated 0.72 per cent growth in the non-oil sector in Q1 2017 compared with a contraction of 0.33 per cent and 0.18 per cent in Q4 and Q1 2016 respectively, driven by increased activities in crop production, information and communication, manufacturing, transportation and other services.
The data released by NBS showed that the non-oil sector contributed 91.10 per cent to the GDP in Q1 2017, while the oil sector contributed 8.90 per cent. The Services sector remains the largest sector of the Nigerian economy, accounting for 55.45 per cent of the GDP as at Q1 2017. This was followed by industries sector, which contributed 23.21 per cent to the GDP as in Q1 2017, while agriculture accounted for 21.35 per cent of the GDP as at Q1 2017.
The GDP data further indicated that agriculture recorded the highest weighted growth rate of 0.72 per cent in Q1 2017 followed by the information and communication sector with a weighted growth rate of 0.34 per cent as at Q1 2017.