Economic activities in the non-oil sector of Nigeria’s economy are picking up again according to figures from the National Bureau of Statistics (NBS) released this morning.
Activities in the non-oil sector, which account for 91.32 percent of the country’s total economic output grew by 1.45 percent in the last three months (Q4) of 2017, the NBS data show. This is a reversal of the negative growth of -0.76 percent recorded in the third quarter of 2017 and more than twice the average growth rate recorded in the first and second quarter of 2017.
Overall economic growth for 2017 came in at 0.83 percent, helped by an 8.68 percent growth in the oil sector. Even though the oil sector accounts for less than 10 percent of the country’s economic output, the non-oil sector remains highly dependent on the earnings from the sector which accounts for more than 90 percent of export earnings.
Troubles in the oil sector plunged the country into its first recession in 2016 when economic output declined by -1.58 percent. Even though the country is out of recession, many analysts say the growth is still very fragile because it is mainly supported by higher oil prices and production.
However, a strong growth recorded in the fourth quarter of 2017 raises expectations that the economy is finally on the upward trend. NBS data shows economic growth came in at 1.92 percent in Q4, higher than the growth of 1.40 percent in Q3.
But analysts have noted that the country’s overall GDP growth of 0.83 percent remains low.
“The growth rate still lags far behind where Nigeria should be,” said Razia Khan, chief economist for Africa at Standard Chartered, although she noted that the full-year growth was higher than the 0.7 percent forecast by her bank.
“Unless the 2018 budget is approved soon … higher oil prices alone are not going to be sufficient to provide a really strong lift to the GDP numbers,” she was quoted by Reuters as saying.
But analysts at Standard Bank Research noted that Nigeria’s growth rate of 0.83 percent was slightly above their expectation of 0.7 percent.
“The economy continued on its steady pace of recovery, driven mainly by the rebound in the oil sector. However, in Q4 the non-oil sector showed some signs of recovery after being depressed for most of the year. We maintain that risks to our 2.5 percent growth forecast for 2018 are probably skewed to the upside, should oil production remain above our assumption of 1.75m bpd and should access to credit for the non-oil sector be easier to obtain compared to last year”
But despite the growth in GDP, analysts at Standard Chartered Research say private sector consumption expenditure will recover only slowly through the course of the next 12 months and will probably not recover to the pre-2014 levels any time soon.
“In fact, we believe that real wages have actually been declining for much of the last either years, making it difficult for a massive improvement in consumer sentiment based on our expectation of a 2.5 percent real GDP growth rate in 2018. Having said that, government expenditure will continue to be highly correlated with oil price and production levels.”
