August 28, 2018

Oil sector depresses Nigeria’s Q2’18 GDP

Oil sector depresses Nigeria’s Q2’18 GDP

By Soni Daniel, Prince Okafor & Elizabeth Adegbesan
The National Bureau of Statistics (NBS) has disclosed that the decline in Nigeria’s oil production has slowed the country’s Gross Domestic Product (GDP) to 1.5 percent in the second quarter of 2018 (Q2’18).

A mineral exploration drilling team drills holes to identify the location and the quality of gold deposits at the Segilola Gold Project site in the village of Iperindo-Odo Ijesha, near the city of Ilesha, on May 29, 2018.
Nigeria is working to diversify its economy, which has been dependent on the oil and gas sector for decades, through formalising the artisanal mining sector. / AFP PHOTO

In its latest GDP report released yesterday, NBS stated that  the country’s GDP grew by 1.5 percent year-on-year (YoY) in real terms to N16.58 trillion in  Q2’18 even as  the average daily oil production in Q2’18  dropped by 0.03 million barrel per day (mbpd) to 1.84 mbpd YoY  from 1.87 mbpd in Q2’17.

The GDP figure for Q2’18 is at 0.45 basis point down from the 1.95 percent recorded in Q1’18, and for the first time since the exit from recession, last year, growth was driven by the non-oil sector that expanded by 2.05 percent.

Leading the expansion in real terms were the transportation (21.76 percent), construction (7.66 percent) and electricity (7.59 percent) sectors, while growth in agriculture sector dropped to 1.3 percent from 3 percent.

The report stated: “In Q2’18, Nigeria’s GDP grew by 1.5 percent YoY in real terms to N16.58 trillion. Growth in Q2’18 was 0.79 percentage points higher when compared to the second quarter of 2017 which recorded a growth of 0.72 percent, but 0.45 percentage  points slower than 1.95 percent recorded in Q1’18. On a quarter-on-quarter basis, real GDP growth was 2.94 percent.

“For better clarity, the Nigerian economy can be classified broadly into the oil and non-oil sectors. Broadly speaking, growth in Q2’18 was driven by developments in the non-oil sector as Services sector recorded its strongest positive growth since 2016.”

Minister of Budget and National Planning, Senator Udoma Udo Udoma, sees the latest GDP figures as positive saying they indicated that the  Economic Recovery and Growth Plan, ERGP, his ministry was driving was yielding positive results.

Udoma described the  2.05% growth in the non-oil sector as the strongest growth in the non-oil GDP since the fourth quarter of 2015.

The Minister, however, regretted that there was a slight drop in real GDP growth rate for the second quarter principally as a result of the contraction in the oil sector.

According to him,  the contraction in the Crude oil and Gas sectors is attributable to some production issues which are being addressed by the Nigerian National Petroleum Corporation, NNPC.

He pointed out, for instance, that the average crude oil production was only 1.84 million barrels a day in Q2 2018 as opposed to an average production of 2 million barrels a day in Q1 2018.

But he is optimistic that once the issues are addressed the nation should be able to achieve positive growth in the oil and gas sector.    A statement by the Minister’s Special Adviser on Media, Mr. Akpandem James, also said that the slightly weaker growth in the Agriculture sector Q1’18 also posed another concern to the administration.

But the development, he noted, was partly attributable to the security challenges mainly in the North East and North Central zones.

Commenting on this development, analysts at Cowry Asset Management Limited, a Lagos based investment house, said: “We note that the slow growth in agricultural sector was due to the incessant clashes between the suspected herdsmen and farmers in the north central of the country.”

Global Head of Currency Strategy & Market Research at FXTM, Jameel Ahmad, in a mail to Vanguard stated: “While the headline might be that growth slowed on a quarterly basis from 1.95 percent to 1.5 percent in Q2, the economy expanded on an annualized basis with growth close to 0.8 percent. This is a positive result.’’