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Increased oil production lifts Nigeria’s GDP by 1.4% in Q3

…Non-oil sector declines by 0.76%
…Economy still technically in recession—Experts

By Babajide Komolafe, Emma Ujah, Peter Egwuatu, Nkiru Nnorom, Franklin Alli, Godfrey Bivbere, Rosemary Onuoha, Prince Okafor & Elizabeth Adegbesan

Driven by increased crude oil production and sustained growth in agricultural output, Nigeria’s economy grew by 1.4 percent to N29 trillion in the third quarter of the year (Q: 3 2017), from 0.7 percent in the second quarter of the year (Q2: 20170).

National Bureau of Statistics, NBS, disclosed this, yesterday, in its Gross Domestic Product, GDP, report for Q3 2017, which revealed that nation’s GDP grew by 1.4 per cent year-on-year (y-o-y) in real terms from the revised 0.7 per cent recorded in the second quarter (Q2) of 2017.

The NBS stated: “The nation’s Gross Domestic Product, GDP, grew in Q3 2017 by 1.40 per cent (year-on-year) in real terms, the second consecutive positive growth since the emergence of the economy from recession in Q2 2017.

“This growth is 3.74 per cent points higher than the rate recorded in the corresponding quarter of 2016 ( -2.34 percent) and higher by 0.68 percent points from the rate recorded in the preceding quarter, which was revised to 0.72 percent from 0.55 percent  (Q2 was revised following revisions by NNPC to oil output and hence led to revisions to Oil GDP) . Quarter on quarter, real GDP growth was 8.97  per cent.

“In the quarter under review, aggregate GDP stood at N29,451,303.99 million in nominal terms higher when compared to N26,537,651.01 million in Q3 2016, resulting in a Nominal GDP growth of 10.98 per cent. This growth is higher relative to growth recorded in Q3 2016 of 9.15 percent.”

The report, however, showed that the nation’s economy is still exposed to the risk of sliding back into recession, as only two out of 10 sectors grew during the quarter. While the oil and gas sector grew by 25.89 percent, the non- oil sector contracted by 0.76 percent.

According to the NBS, the growth in GDP in Q3 2017 was driven by 25.89 percent growth in the mining and quarrying sector and 3.06 percent growth in the agricultural sector.

Economy still technically in recession

Economiy experts, however, opined that the negative growth recorded in the non-oil sector in Q3 figures indicates that the economy is technically still in recession.

Managing Director/Chief Executive, Financial Derivatives Company Limited, Mr. Bismarck Rewane said: “If you take away petroleum, it means that all other sectors are actually technically in recession, therefore something has to happen, and the only way to make thing happen is to increase electricity output as well as to stimulating the nation’s economy. We need to do more as a country in improving access to electricity.”

President, Abuja Chamber of Commerce and Industry, ACCI, Mr. Tony Ejinkeonye, similarly stated: “Aside from the oil sector that recorded a significant growth, agriculture grew by just by 3.6 percent while other sectors like manufacturing, real estate, education and financial institutions and  insurance declined by 2.85, 4.12, 1.22, and 6.54 percent respectively. ”

On his part, Director General, Lagos Chamber of Commerce and Industry, LCCI, Mr. Muda Yusuf, said the report showed that government still needs to do a lot in creating enabling environment for businesses.

He said: “We know that the main recovery is from agriculture and oil; manufacturing didn’t do quite well. And that underscore the fact that we still have quite a lot to do in the issue of enabling environment for manufacturing to thrive because manufacturing sector contracted going by that number and that means that we still have a lot to do in the areas of cost of fund, power, and logistics.

Oil sector growth’ll enhance non-oil sector

Reacting to the development, Mr. Johnson Chukwu, CEO, Cowry Asset Management Limited, a Lagos based investing banking firm, said: “The fact that the economy grew by 1.4 per cent is very positive in the sense it will further boost confidence of investors in the economy. Investors go to economies that grow, not economies that are shrinking because you don’t expect to have a robust business in an economy that is shrinking. So, the growth of 1.4 per cent from 0.72 per cent shows that the economy is actually on a continuous recovery trajectory.

“For the investing community, the implication is that the opportunity for improvement in returns is better now in the sense that it will eventually translate into positive performance by corporates.

“Although, if you look at the performance of the GDP on sectorial basis, the major growth was recorded in the oil and gas sector. The non-oil sector contracted by 0.70 per cent, which actually implies that the growth we are experiencing may not translate to creation of jobs because we know that the structure of the oil and gas sector is that value chain in the oil and gas sector is not domesticated. So, the impact of growth in the oil and gas sector does not translate to direct creation of jobs within the economy.’’

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