Analysts: Nigeria’s Q4 2017 GDP Growth Robust, Foundation for 2018 Projection 


Kunle Aderinokun and Bamidele Famoofo

Economic experts and financial analysts have said the 1.92 per cent Gross Domestic Product (GDP) growth year on year, recorded in the last quarter of 2017 was robust, and a sure footing for achieving growth projection for 2018. 

For three consecutive quarters after it exited its worst recession in two decades, Nigeria, most populous nation in sub-Saharan Africa, has recorded a consistent and appreciable growth in GDP.

The latest figure released by the National Bureau of Statistics (NBS), showed that GDP grew by 1.92 per cent year on year in fourth quarter of 2017 compared to 1.4 per cent in third quarter of 2017.

Statistician General of the Federation, Dr. Yemi Kale, in the report recently released submitted that Nigeria had maintained a consistent economic development since second quarter in 2017 when it exited recession.

“The nation’s Gross Domestic Product grew in Q4 2017 by 1.92 per cent (year-on-year) in real terms, maintaining its positive growth since the emergence of the economy from recession in Q2 2017. This growth is compared to a contraction of -1.73 percent recorded in Q4 2016 and a growth of 1.40 per cent recorded in Q3 2017”, he said.

The report showed that real GDP growth stood at 4.29 per cent quarter on quarter while real annual growth rate of 0.83 per cent achieved in the review period was higher by 2.42 per cent than -1.58 per cent recorded in 2016.

Also, in the quarter under review, aggregate GDP stood at  about N31.21 trillion in nominal terms higher when compared to N29.17 trillion in Q4 2016, resulting in a Nominal GDP growth of 6.9 per cent.

“This growth is lower relative to growth recorded in Q4 2016 at 12.49 per cent. Nominally, 2017 recorded an annual growth rate of 12.05 per cent higher by 4.25 percent compared to 2016 annual growth of 7.80 per cent,” said the NBS.

Economist, Sub-Saharan Africa, Renaissance Capital, Yvonne Mhango, noted that with the latest GDP growth rate, there were three encouraging   developments that supported the firm’s view of more balanced economic growth of 2.9 per cent in 2018.

According to her, “Growth strengthened to 1.9 per cent YoY in 4Q17, vs -1.7 per cent YoY in 4Q16, which helped pull up 2017 growth to 0.8 per cent, vs -1.6 per cent in 2016. There are three encouraging developments that we would like to point out. First, in 2017 the oil sector grew for the first time in six years, by 4.3 per cent. Second, in 4Q17 the non-oil sector grew by its fastest rate – 1.5 per cent YoY – in eight quarters. This helped growth in the sector improve to 0.5 per cent in 2017 vs -0.2 per cent in 2016. Third, we believe the return to growth of the biggest services’ subsector, wholesale and retail trade, in 4Q17, after six quarters in decline, indicates the consumer may be on the cusp of a recovery. This supports our view of more balanced economic growth in 2018, of 2.9 per cent.”

In the same vein, an economic researcher with the research arm of Vetiva Capital Management Limited, Mr. Michael Famoroti,  described the growth as impressive.  “Although it slightly trailed consensus expectation of 2  per cent year on year, we judge this to be a robust economic performance for the close of 2017,” he said.

Vetiva Research attributed the impressive growth to higher prices of oil during the year.

 “It is likely that government policy also played some part in supporting growth, mainly in the form of agriculture promotion initiatives in line with the Agriculture Promotion Policy (APP), partial foreign exchange (FX) market liberalisation, and Central Bank of Nigeria tight monetary stance to combat inflation.”

Whilst Vetiva applauded government contribution to GDP growth in the review period, it didn’t spare the Buhari government knocks where necessary. “At the same time, truncated budget implementation, fiscal slippage, and legacy challenges from FX policies and weak infrastructure would have adversely affected growth”.

Notwithstanding, Famoroti and his team at the research department are optimistic about better growth in 2018. “We are more positive about Nigeria’s growth prospects in 2018 as increased aggregate demand supplements continued growth in agriculture and oil. Our base GDP growth forecast for financial year 2018 stands at 2.4 percent year on year,” Vetiva said.

Analysts at Cordros Securities Limited could not agree less with their counterparts at Vetiva, as they concurred that the GDP figures suggested positive fourth quarter 2017 corporate earnings, the release of which will significantly support market activities.

“Overall, we look for 2018 financial year GDP growth of 2.63 percent, supported by sustained expansion in both the oil and non-oil sectors”, Cordros Research projected.

To the Director, Union Capital Markets Limited, Egie Akpata, the figures released by NBS were somewhat expected. “We are starting to see the results of policy changes around FX management by CBN and the overall increase in oil prices,” he acknowledged.

Akpata, however, cautioned that, “The CBN has a delicate job to ensure that FX supply is maintained to the market while managing interest rates so that the private sector can borrow for expansion.”

“It remains to be seen how much extra spending the government will release ahead of the February 2019 elections. The CBN will have to deftly manage FX supply, liquidity and interest rates in Q4 so as not to derail the continued economic expansion,” he added.

Government was particularly excited that key sectors of the economy contributed appreciably to GDP growth in the review period, whilst it is optimistic that it will achieve its 3.5 percent growth projection for 2018.

Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu,  said in a statement: “There are two encouraging aspects of the figures. The first is that all major sectors of the economy namely agriculture, industry and services are now experiencing positive growth.  Agriculture, which accounted for 25 percent of GDP in 2017, grew by 4.23 percent in Q4 2017; while Industry grew by 3.92 per cent. The Services sector, which is about 53 per cent of GDP, returned to positive growth in Q4 2017.  Although the increase was marginal at 0.10, it represented a positive swing of 2.76 percentage points from the level in Q3 2017”.

Dipeolu said the Q4 2017 GDP figure represented a consolidation of post-recession growth in the national economy. 

The oil sector contributed 7.17 per cent of total real GDP in Q4 2017, up from figure recorded in the corresponding period of 2016 and down from the preceding quarter, where it contributed 6.75 percent and 10.04 per cent respectively. The sector’s annual contribution was 8.68 per cent in 2017 and 8.35 percent in 2016.

On the other hand, in real terms, the non-Oil sector contributed 92.83 per cent to the nation’s GDP, lower from share recorded in the fourth quarter of 2016 (93.25 per cent) but higher than in the third quarter of 2017 (89.96 per cent). Annual contribution was 91.32 per cent and 91.65 percent in 2016.

Also, in her own analysis on the drivers of growth, Mhango noted that the  oil’s sector grew by 4.3 per cent in 2017, after contracting for five years. 

“This decline explains the fall in the sector’s contribution to GDP, to 8.6 per cent in 2017, vs 15 per cent in 2011, when we last saw growth in the sector. Peak oil production in the past 10 years was 2.4Mb/d in 2010 and 2011, following a 2009 amnesty deal that the late President Umaru Yar ‘Adua’s administration offered to Niger Delta militants – which led to a cessation of attacks on oil facilities. 

“Illegal oil bunkering during President Goodluck Jonathan’s 2011-2015 term reversed this recovery. However, it was the resumption of attacks on oil facilities, when President Muhammadu Buhari came into office, that led to the biggest fall in production in a decade – 1.5Mb/d in August 2016. Production has since recovered to 1.9Mb/d in 10M17, on the back of a new amnesty deal, hence the sector’s growth in 2017 for the first time since 2011,” she pointed out.

Mhango added that, the manufacturing and agriculture explained the non-oil sector’s bounce. According to her, “The non-oil economy’s growth recovered to 0.8 per cent in 2017, from -1.6 per cent in 2016. 

The main drivers of this were crop production and the biggest manufacturing sub-sector, food, beverages and tobacco. It was especially encouraging to see crop production’s YoY growth recover to 4.6 per cent in 4Q17, from 3.2-3.5 per cent in 1Q-3Q17 when floods, strikes and insurgencies in various parts of the country weighed on the agricultural sub-sector. Food, beverages and tobacco – which uses inputs from the agricultural sector – grew by 2.3 per cent in 2017, after declining for two years. However, this expansion was countered by declines in two other manufacturing subsectors, oil refining and cement. 

This explains the manufacturing sector’s negative 0.2 per cent growth in 2017. However, that was an improvement from -4.3 per cent in 2016.”

Similarly, Mhango pointed out  that services’ sector emerged from decline and consumer is on the cusp of recovery. 

She noted that, the services’ sector, which accounted for half of Nigeria’s GDP, emerged from recession, and grew for the first time in 4Q17, by a modest 0.1 per cent YoY, after being in decline for six quarters. 

“This recovery was largely due to wholesale and retail trade (trade), which produces one-third of the services’ sector’s output; the sub-sector grew by 2.1per cent YoY in 4Q17, following six quarters of negative growth. In the absence of rigorous GDP by expenditure data we use trade (from GDP by production) as a proxy for the consumer, because some of the indicators used to measure it include retail sales, volume of goods handled. We believe the indicators concomitant recovery implies the consumer may be on the cusp of a recovery.”