Oil lifts Nigeria’s GDP growth to 1.40% in Q3

FOR the second consecutive month since the emergence of the economy from recession in Q2 2017, Nigeria’s Gross Domestic Product (GDP) grew positively in real terms in the third quarter (Q3) of 2017 by 1.40% (year-on-year), popped up by the oil sector.

This is despite projections by International Monetary Fund, which has insisted that the economy would only grow by 0.8 percent by the end of 2017.

The World Bank forecast, on the other hand, said Nigeria’s economy would grow 2.5% on modest rise in commodities prices and strengthen external demand, a basis point less than regional forecast of 2.6 percent The non-oil sector, however, grew in the negative by -0.76% in real terms during the reference quarter, worse than the previous quarter as well as third quarter of 2016reve

The 1.40 percent growth according to National Bureau of Statistics (NBS) is 3.74% points higher than the rate recorded in the corresponding quarter of 2016 (-2.34%) and higher by 0.68% points from the rate recorded in the second quarter of 2017, which was revised to 0.72% from 0.55% (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% Year to date Real GDP growth stands at 0.43% In the quarter under review, aggregate GDP stood at N29,451,303.99million in nominal terms higher when compared to N26,537,651.01 million in Q3 2016, resulting in a Nominal GDP growth of 10.98%.

This growth is higher relative to growth recorded in Q3 2016 of 9.15%.
The broad classification into the oil and non-oil sectors will give a clearer depiction of the Nigerian economy.

In the period under review, Oil production is estimated to have averaged 2.03million barrels per day (mbpd), 0.15million barrels higher than the revised daily average production recorded in the second quarter of 2017 (revised from 1.84mbpd to 1.87mbpd).

Oil production during the quarter was higher by 0.42million barrels per day relative to the corresponding quarter in 2016, which recorded an output of 1.61mbpd.

Real growth of the oil sector was 25.89% (year-on-year) in Q3 2017. This represents an increase of 48.92% relative to rate recorded in the corresponding quarter of 2016.

Growth also increased by 22.36% when compared to Q2 2017 which was revised from 1.64% to 3.53%. Quarter-on-Quarter, the oil sector grew by 21.10% in Q3 2017.

As a share of the economy, the Oil sector contributed 10.04% of total real GDP in Q3 2017, up from figures recorded in the corresponding period of 2016 and up from the preceding quarter, where it contributed 8.09% and 9.04% to GDP respectively.

Growth in non-oil sector was lower by -0.79% point compared to the rate recorded same quarter, 2016 and -1.20% point lower than in the second quarter of 2017.

This sector was driven this quarter mainly by Agriculture (Crop), other services and Electricity, gas, steam and air conditioning supply.

In real terms, the Non-Oil sector contributed 89.96% to the nation’s GDP, lower than the share recorded in the third quarter of 2016 (91.91%) and in the second quarter of 2017 (90.96%).

The IMF advised the Federal Government to pursue a policy of fiscal consolidation through higher non-oil revenues, to ensure stability in growth.

“Economic growth in Nigeria is expected to recover slightly to 0.8 percent this year after the country slipped into its first recession in more than two decades last year,” IMF said in the Regional Economic Outlook report.

The Fund said the government saw significant revenue shortfalls in the first half of the year, with interest payments remaining as high as 40 percent at end of June.

It projected interest payments would rise further under current economic policies.

World Bank, on the other hand, predicted that Nigeria’s economy would grow 2.5% on modest rise in commodities prices and strengthening external demand, a basis point less than the regional forecast of 2.6 percent, according to the Bretton Woods institution’s June Global Economic Prospects released Monday.
The revised forecast is 1.5 percent higher than the one percent its earlier forecast for the country in January, 2017.


However, the downside risks to the outlook include an insufficient adjustment to low commodity prices, weaker improvements in commodity prices, stronger-than-expected tightening of global financing conditions, and political uncertainty.

According to the outlook, oil prices are expected to average $53/bbl in 2017, up 24 percent from 2016, but $2/bbl less than January forecasts. Large stocks are expected to unwind during the second half of the year.

“Downside risks for oil prices arise mainly from the resilience of the U.S. shale oil industry or weak compliance to the production cuts. Conversely, further disruptions among politically stressed producers (e.g., Iraq, Libya, Nigeria, República Bolivariana de Venezuela), as well as commitments to additional production cuts into 2018, could temporarily lift prices.”

For sub-Saharan Africa, growth is projected to recover in 2017 to 2.6 percent, reflecting a modest rise in commodity prices, strengthening external demand, and the end of the drought in several countries.