Following the dip in gross domestic products, GDP, for fourth quarter Q4, 2015 reported last week by the National Bureau of Statistics, NBS, analysts have delved into how and why the economy got to the declining year end.

In its analysis last week, researchers at ARM Investments noted that in contrast to Q3 2015, when on-streaming fields helped swing production to 2.17 million barrel per day, mbpd, NBS reports that oil production declined to 2.16mbpd in Q4 2015 which, relative to 2.19mbpd in the corresponding period in 2014, largely accounts for the contraction recorded in the sector.

It stated “we link the negative growth to impact of several disruptions along the Trans Niger, Nembe Creek and Forcados pipelines in Q4 2015. “Furthermore, we note that sustained decline in crude oil prices which has induced industry-wide cutbacks on oil exploratory activity continued to weigh on domestic production”.

“Continued moderation in construction activity, as the impact of dwindling oil prices curtailed the ability of the federal government and state governments to embark on capital projects, was evident in further compression in Building and Construction sector which officially entered into recession since Q3 2015 at -0.11 per cent YoY, and Q4 2015 at -0.4 per cent   YoY.

“In a similar vein, Services GDP maintained the downward trajectory over 2015 (Q1: 7.3 per cent YoY, Q2: 4.5 per cent YoY, Q3: 3.8 per cent YoY, Q4: 3.2 per cent YoY) as slowdown heightened across its two key segments, namely,   Telecommunications and Real Estate.

“Deceleration in the former (telecommunications) is in line with our views about impact of recent regulatory activism on MTN, which resulted in the disconnection of 5.1 million lines, impacting subscriber growth.

“On the latter (real estate), weakness reflects continued restraint on demand for luxury real estate following the anti-corruption thrust of the Buhari government and bulging oversupply in the office space which pressured rental yields in 2015.

“The foregoing speaks to continued struggles for the oil sector over 2016. On balance of all the factors considered, delayed progress on fiscal plans to stem the slide in GDP growth and fresh headwinds to oil production results in a downward revision to our 2016 mean growth forecasts.

“Incorporating the aforementioned points into our forecasts and adjusting for the loss of one quarter of the planned increase in fiscal spending, with delayed budget passage, leads to a 60 basis points moderation in our 2016 growth estimate to 2.9 per cent YoY”.