Analysts see flicker of light at end of the tunnel 

By Emeka Anaeto, Business Editor

The Nigerian Bureau of Statistics, NBS, released the third quarter 2023 Gross Domestic Product, GDP, data during the weekend and economy analysts are giving some measured appraisal indicating there may be slight hope of recovery in the near terms, though the GDP figures were not so positive. 

Going by the data obtained by Vanguard Public Finance Report, the Nigerian economy extended its positive stride in Q3:2023 to firm up by 2.5 percent Year-on-Year, YoY, in real terms, indicating a 3 basis points (bps) and 30bps higher than Q2 2023 and Q3 2022 respectively. 

Giving their perspectives to the data, analysts at Afrinvest West Africa, a Lagos based investment house, stated: ‘‘Following expectations of a continued increase in oil production, we anticipate the oil sector would play a larger role in contributing to the overall real GDP for the full year of 2023. 

‘‘Also, ramping up oil productions to levels around 1.8mbpds would position Nigeria to capitalize on potential exchange rate revaluation gains from crude oil sales. 

‘‘Regarding the Service sector, we anticipate its contribution to real GDP to maintain growth, particularly with robust support from the Telecommunications and Financial Services sub-sectors.

“Similarly, an optimistic performance is expected from the Transport & Storage and Trade sub-sectors in Q4:2023, driven by seasonal business activities during the festive periods. 

‘‘Despite the resilience demonstrated in Q3:2023 GDP performance, we have adjusted our full-year forecast for 2023 from 3.2% YoY to 2.7%. 

Also commenting, economists at CardinalStone Capital, another Lagos based finance and investment firm, stated: ‘‘Looking ahead, we expect the oil sector to exit a recession in Q4’23, as we anticipate a sustained improvement in oil production, settling at 1.50mb/d. 

‘‘On the non-oil front, we expect the positive impact of year-end festival activities to reflect on the agricultural and industrial sectors. 

‘‘Elsewhere, we are optimistic about the services sector due to the accretive benefit of strengthened 4G and 5G network coverages and increasing private sector credits. 

‘‘Overall, we forecast a 2.8% GDP growth rate in Q4’23 and 2.65% in FY’23.”

The analysts had given some details of the figures contained in the data across all sectors. The Afrinvest economists, looking into the data, said: ‘‘Broadly speaking, the growth reflected positive but relatively weak non-oil sector performance (2.8% YoY) and significant improvement in oil sector (-0.9% YoY). 

‘‘From a structural perspective, Services remained the main engine of growth (4.0% YoY) ahead of the Agriculture and Industries sectors which grew 1.3% and 0.5% respectively in the period. 

‘‘Further analysis across activity sectors showed Finance & Insurance (4.4% of real GDP) rose 28.2% YoY, reflecting the impact of FX revaluation gains on the books of major players in the sector. 

‘‘The Communications & Information (16.0% of real GDP) grew 6.7% YoY following significant investment in infrastructure and expansion in subscriber base (up 7.0% YoY to 220.5m as of Sep-23). 

‘‘Also, Manufacturing, Trade, and Construction (contribution to real GDP: 8.4%, 15.2%, and 3.4%) grew 0.5%, 1.5%, and 3.9% respectively, indicating the challenging operating environment as businesses cope with sharp FX depreciation, rising energy cost, and weakening consumer purchasing power. 

‘‘Meanwhile, Mining and Quarrying (5.6% share of GDP) declined by 2.0% YoY but recorded a 10.9% Quarter-onQuarter (QoQ) growth in Q3:2023 mirroring the improving fortunes in the Oil industry. 

‘‘Also, Transportation and Storage comprising Road (- 43.7%), Rail & Pipelines (+18.2%), Water (+7.3%), Air (+4.2%), Transport Services (+3.9%), and Post and Courier Services (-1.6%) contracted 35.9%. 

‘‘The decline highlights negative knock-on effect of the subsidy on PMS, effect of flooding on mobility and insecurity concerns. 

‘‘For the Oil sector, the average daily production grew 20.8% YoY to 1.45 million barrels per day (mbpd) due to low base effect. ‘‘Based on the data from Nigerian Upstream Petroleum Regulatory Commission (NUPRC), major oil terminals performed strongly in Q3:2023. 

‘‘Specifically, Bonny (+1,875.7% YoY), Brass (+245.5% YoY), Forcados (+6,028.5%), Escravos (+24.0%), and TuljaOkwuibome (+12.5%) which accounts for 40.2% of total oil production (as of Sept. 2023) all reported uptick in the period. 

‘‘Higher oil output translated to improved QoQ GDP performance (2.6%) but contribution of the sector to overall GDP dipped 0.2ppt to 5.5%.’’ 

Nigerian economy grew modestly in Q3’23 – CardinalStone 

Also the analysts at CardinalStone Finance, giving their insight into the GDP data, stated: ‘‘The Nigerian economy showed modest improvement in Q3’23, expanding by 2.54% YoY compared to 2.51% YoY in the prior quarter. 

‘‘However, this outcome fell short of the Bloomberg consensus by 41bps, signalling a less robust performance in the non-oil sector, which settled at 2.75% compared to 3.58% in Q2’23.

‘‘The weaker growth in the non-oil sector may have stemmed from the dual actions of the CBN. First, the CBN pulled back from the direct development finance interventions orchestrated by the former CBN leadership. 

‘‘Given that a significant portion of CBN’s development finance is concentrated in the Agriculture sector, the stoppage, coupled with preexisting issues like insecurity, might have constrained the sector’s outturn, whose growth (+1.30% YoY) recorded the lowest Q3 performance on record. 

‘‘The second action of the CBN was the sustained hawkish rendition, which resulted in material increases in the domestic interest rate. 

‘‘This elevated borrowing rate might have dampened sentiment in the Manufacturing sector, which recorded a marginal increase of 0.48% YoY (vs. 2.20% YoY in Q2’23). 

‘‘In addition, the lingering currency pressures further stoked the weak outturn in the manufacturing sector, as we note that 60.00% of companies on the NGX 30 have significant FX needs. 

‘‘Furthermore, we note slower growth in the services sector (3.99% YoY vs 4.42% in Q2’23) due to the slowdown in the ICT sector (6.69% YoY vs 8.60% Q2’23) as a result of lower CAPEX intensity by major telecommunication players. 

‘‘In addition, rising inflation (currently at an 18-year high) dampened consumer spending capacity and might have led to weaker trade sector growth.

‘‘Elsewhere, the oil sector contracted marginally by 0.85% YoY from -13.43% YoY recorded in the prior quarter. The sector seems to be on the verge of exiting a recession, as oil production improved to 1.45mb/d in the review quarter from 1.22mb/d in Q2’23.’’