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FIRST QUARTER ’19: Insecurity, election slow economic growth to 2%

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•Rewane, other analysts express optimism

By Babajide Komolafe & Emmanuel Elebeke

The Nigeria National  Bureau of Statistics (NBS), yesterday, said the nationfs Gross Domestic Product (GDP), which represents level of economic activities in the country, grew at 2.01 per cent in the first quaer(Q1’19), representing  0.38 percentage points decline when compared with the 2.38 per cent growth recorded in fourth quarter of last year (Q4’18).

Analysts, however, blamed the decline on  widespread insecurity and postponement of the general election which combined to undermine economic activities in  Q1’19.

NBS report

According to the NBS GDP report for Q1’19, the non-oil sector recorded a lower growth rate of 2.47 per cent, down from 2.7 per cent recorded in Q4’18, while the oil sector contracted by 2.4 per cent.

The NBS report said: Nigeria’s Gross Domestic Product (GDP) grew by 2.01 per cent (year-on-year), in real terms, in the first quarter of 2019. Compared to the first quarter of 2018, which recorded real GDP growth rate of 1.89 per cent , the Q1 2019 growth rate represented an increase of 0.12 per cent  points.

However, relative to the preceding quarter (fourth quarter of 2018), real GDP growth rate declined by -0.38 per cent  point.  It is worth noting that general elections were held across the country during the first quarter of 2019 and this may have reflected in the strongest first quarter performance observed since 2015. Aggregate GDP stood at N31.79 trillion in nominal terms.

This aggregate was higher than in the first quarter of 2018 which recorded N28.43 trillion, representing a year on year nominal growth rate of 11.80 per cent. The aggregate was however; lower than in the preceding quarter of N35.23 trillion, by -9.75 per cent. The nominal GDP growth rate in Q1 2019 was higher than the rate recorded in Q1 2018 by 2.54 per cent  points. For further analysis, the Nigerian economy can be classified broadly into the oil and non-oil sectors.

Non Oil

The non-oil sector grew by 2.47 per cent in real terms during the reference quarter. This was 1.72 per cent points higher compared to the rate recorded in the same quarter of 2018 but -0.23 per cent  points lower than the fourth quarter of 2018. During the quarter, the sector was driven mainly by Information and communication technology.

Other drivers were Agriculture, Transportation and Storage, Trade and Construction. In real terms, the non oil sector contributed 90.86 percent to the nationfs GDP, higher than recorded in the first quarter of 2018 (90.45 percent ) but lower than the fourth quarter of 2018 (92.94 percent ).

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Oil sector

Real GDP growth in the oil sector was -2.40 per cent (year-on-year) in Q1 2019 indicating a decrease by -16.43 per cent points relative to the rate recorded in the corresponding quarter of 2018. Growth decreased by -0.79 percent points when compared to Q4 2018 which was -1.62 percent. Quarter-on-Quarter, the oil sector recorded a growth rate of 11.60 percent in Q1 2019. The Oil sector contributed 9.14 percent to total real GDP in Q1 2019, down from figures recorded in the corresponding period of 2018 but up compared to the preceding quarter, where it contributed 9.55 percent and 7.06 per cent  respectively.

Analysts react

Analysts described the 2.01 per cent economic growth as disappointing but expressed hope that growth will pick up in the coming quarters.

“We should be growing at double digit in an inclusive manner 2.01 per cent GDP growth rate means we are still getting poorer each day than the previous, said Taiwo Oyedele, Head of Tax and Regulatory Services at PwC Nigeria.

Also commenting, Managing Director/Chief Executive, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said: “I am not surprised. From what I saw from the Purchasing Managers Index (PMI) reports, I know that we are going to have a slow down.

“The factors responsible include seasonal effect, economic activity is usually slow in first quarter, then the election postponement, as well as conflict between monetary policy and fiscal policy.

“We need to grow at four to six per cent but for that to happen, we must take strategic decisions. We need fiscal adjustment.”

Analysts at Vetiva Capital Management Limited, a Lagos-based investment banking firm, said: ”Though we had earlier expected growth in the first quarter to be mildly supported by electioneering spend, we believe a notable reason for the weaker GDP figure was the last-minute postponement of the elections which led to sizable disruption of business activities.

“More so, security challenges, particularly concentrated around the Northern and Niger-Delta regions also adversely impacted the business environment.

“We expect growth in the Nigerian economy to strengthen in Q219, as dampening effect of the election period wear out.”

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Also sounding optimistic, analysts at Cowry Assets Management Limited, said: The improved 2.01 per cent  y-o-y (year-on-year) real GDP growth was reflective of improved business sentiment and investments in an environment of favourable monetary policies and macroeconomic variables, particularly exchange rate and inflation rate. Furthermore, we expect growth to improve in the Q2 2019.”

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