Over the past decade, Nigeria’s economy has displayed a recurring trend that raises some interesting questions. Every year, the country’s GDP growth in the first quarter consistently lags behind the performance seen in the final quarter of the previous year.
“In many countries, economic performance changes with the seasons, but in Nigeria, these changes are more pronounced due to specific characteristics of its economy.”
From 2014 to 2024, this pattern has remained consistent, with Q1 growth rates regularly falling below those of Q4. For example, Nigeria’s economy grew by 7.67 percent in Q4 2013, but by Q1 2014, this had dropped to 6.21 percent.
A similar decline occurred between Q4 2023 and Q1 2024, with growth falling from 3.46 percent to 2.98 percent. What exactly is driving this trend, and is it something to be concerned about?
To understand this, we need to look closely at how Nigeria’s economy operates throughout the year. Economists often explain this phenomenon as a result of “seasonality.” This refers to regular fluctuations in economic activity based on the time of year, and it’s not unique to Nigeria.
In many countries, economic performance changes with the seasons, but in Nigeria, these changes are more pronounced due to specific characteristics of its economy.
The final quarter of the year (Q4) is typically a busy time for Nigeria’s economy, fuelled by several factors. The holiday season, marked by Christmas and New Year celebrations, drives up consumer spending as people shop for gifts, travel, and host festivities. This spending boosts trade and business activities, making Q4 a high point for the economy.
Government spending also picks up during this period. Ministries and agencies often rush to use their budgets before the fiscal year ends, injecting funds into sectors like construction, public services, and trade. Additionally, Q4 aligns with the peak harvest season in agriculture, a major part of Nigeria’s economy, contributing to higher productivity and economic growth.
However, this flurry of activity has its downsides. Late spending by government agencies, as noted by the World Bank, often reduces the impact of investments and public services. According to NISER, from January to September 2023, Nigeria’s budgeted revenue and spending fell short by 21.7 percent and 48.8 percent, respectively. Such gaps in implementation raise concerns, especially in a country grappling with significant socioeconomic challenges.
As the year transitions to Q1, the pace slows down. Holiday spending drops, reducing demand for goods and services. Government activities shift focus to planning new budgets, and agriculture sees reduced output as farmers prepare for the next planting season. This combination makes Q1 a quieter economic period compared to the energetic Q4.
This seasonal slowdown is not unique to Nigeria, but it is more noticeable because of the country’s heavy reliance on seasonal driving factors and government spending. Economist Alawode Olugbenga points out that this dependence highlights deeper structural issues in the economy.
While these seasonal patterns are normal, they expose Nigeria’s vulnerability due to limited economic diversification. Despite efforts to broaden its economic base, the country still depends on a few key sectors, leaving it exposed to seasonal changes and external shocks.
The persistent slowdown in Q1 highlights the need for long-term reforms. Since June 2023, Nigeria has embarked on structural changes aimed at improving the economy; unfortunately, the cost of these reforms is hitting vulnerable groups hard.
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Policies that encourage year-round activities, such as expanding manufacturing, services, and technology, could help balance growth throughout the year.
Additionally, making government spending more efficient and improving infrastructure to support steady agricultural productivity would contribute to a more stable and resilient economy.
Looking ahead, what can Nigeria do to address this pattern and achieve more balanced growth across quarters? First, it is evident that non-oil sectors such as services, agriculture, technology, and manufacturing hold the potential to drive consistent growth throughout the year, reducing reliance on seasonal factors.
Recent data underscores this, showing in Q3 2024, the non-oil sector contributed 94.43 percent to GDP, an improvement from Q2 but slightly below Q3 2023.
These figures highlight the growing importance of the non-oil sector in sustaining economic activity and provide a strong foundation for achieving year-round growth. Second, fiscal reforms are essential. The government must find ways to spread its spending more evenly across the year, rather than concentrating it in Q4. Finally, investing in infrastructure, particularly in agriculture, could help extend productivity beyond the harvest season, ensuring year-round contributions to GDP.
It’s important to note that this trend isn’t necessarily a sign of trouble. Instead, it reflects the dynamics of an economy that is still in transition. Nigeria has made strides in improving its economic performance; closing the Q4-Q1 gap could mean more consistent job opportunities and stable prices for Nigerians year-round.
With the right policies and investments, Nigeria can build a more diversified economy that isn’t as heavily influenced by the calendar or global oil markets.
This seasonal pattern may seem puzzling at first, but it tells a deeper story about Nigeria’s economic structure and the challenges it faces. As the country looks to the future, understanding these trends is an essential step toward building a stronger and more consistent economy.
As we look ahead to Q1 2025, the big question looms: will Nigeria continue to fall into this predictable seasonal pattern, or will this be the year that the country finally breaks free? The stakes are higher than ever.
Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).
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