The Nigerian economy expanded at a slower rate in the first quarter of 2019, compared to the fourth quarter (Q4), as a lack of broad-based reforms and election-related uncertainty crimped growth.
Gross Domestic Product (GDP) for Q1, 2019 expanded by 2.01 percent, compared to the 2.38 percent hit in Q4, 2019, the National Bureau of Statistics (NBS) said in a report Monday.
“Generally, the report was very disappointing because we had a broad-based slowdown which was bigger than expected. The oil sector was weaker than expected thanks to lower production while the nonoil sector was as a result of slower momentum in trade and ICT sector,” said
Omobola Omotunde, research analyst at financial services advisory firm Chapel Hill Denham.
Omotunde explained that lack of reforms and election activities which disrupted investments in oil and non-oil sectors led to the sluggish GDP growth rate which was lower than population growth rate.
“For Q2, we should expect a low base impact in the oil and gas sector and relative growth in some sectors like manufacturing with elections activities, while telecoms is expected to slow down significantly because of some normalising base effects. Generally, we should expect flat numbers in Q2 2019,” Omotunde told BusinessDay.
Analysts at CSL Stockbrokers Limited do not envisage any fundamental change in economic growth pattern without strong reforms to alleviate the structural constraints on the economy (insecurity, insufficient power supply, poor road network, unfavourable economic climate, poor credit access and high rate of interest).
“It is hard to see economic growth accelerating. Hence, we maintain our GDP forecast of c.2.0 percent over 2019,” CSL Stockbrokers Limited said in a note sent to BusinessDay.
In addition, despite slowly picking up since the oil price crash in 2014, the Q1, 2019 growth rate is not enough to deal with rising unemployment.
The NBS reported last year that unemployment rate hit a near decade-high of 23 percent in the third quarter of 2018 which implies 20.73 million people are unemployed.
The oil sector of the economy shrank by -2.40 percent in the review period compared with -1.62 percent recorded in Q4 2018 and a growth of 14.02 percent in Q1 2018, while the non-oil sector grew at a sluggish pace of 2.47 percent as against 2.70 percent achieved in the previous quarter but quickened when compared with 0.76 percent growth recorded in Q1 2018.
Oil sector’s contribution to the GDP improved to 9.14 percent from 7.06 percent, while the non-oil contributed 90.86 percent compared with 92.94 percent it added to the nation’s economy in previous quarter.
In the first quarter of 2019, average daily oil production stood at 1.96million barrels per day (mbpd), lower than the average daily production of 1.98mbpd recorded in the same quarter of 2018 by -0.02mbpd but higher than the fourth quarter 2018 production volume by 0.05mbpd.
The level of oil output during the quarter was the highest recorded over the past one year and the second highest since mid-2017.
Similarly, the services and industries sectors decelerated in Q1 2019 to 2.41 percent and 0.04 percent from 2.90 percent and 0.95 percent in Q4 2018, while the agriculture sector grew faster by 3.17 percent from 2.46 percent in the previous quarter.
The contribution of the services and industries sectors increased to 54.60 percent and 23.49 percent in the first quarter of 2019 from 53.62 percent and 20.24 percent respectively, while the contribution of agriculture sector waned to 21.91 percent from 26.15 percent.
President Muhammadu Buhari, who won re-election at the Feb polls, promised to fight poverty and create jobs, a fight he is losing in the world’s latest poverty capital.
Growth of 2.0 percent falls below the country’s annual population growth rate of about 2.6 percent.
That implies that Nigerians are growing poorer. Average incomes have now contracted every year since 2016.
The International Monetary Fund (IMF) projects Nigeria’s economy to expand by 2.1 percent in 2019 from 1.9 percent in 2018.
“We do not expects to see an interest rate cut at the MPC meeting ending tomorrow primarily because the CBN will like to observe the impact of the previous interest rate cut before taking actions,” Omotunde concluded.
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