Telecoms lifts Nigeria’s Q1 GDP to most in 7 years

Telecommunications played a huge role as Nigeria’s Gross Domestic Product (GDP) grew by 3.11 percent in the first quarter of 2022, the highest first-quarter growth in seven years, according to data from the National Bureau of Statistics (NBS).

The industry, which grew by 14.5 percent, an increase from 7.69 percent in the same period last year, contributed the single most to GDP in the first quarter.

“The telecommunication industry has seen strong growth based on the increase in revenue base due to improvement in mobile penetration,” said Omotola Abimbola, Senior Portfolio Manager at Lagos-based investment bank, Chapel Hill Denham.

Despite the contraction in the growth of the oil-sector, growth in the non-oil sector was enough to sustain the economy in the first quarter even though there was a slowdown compared to the fourth quarter of 2021 as declining oil production showed up in economic performance.

“The non-oil sector has been doing way better than expected, particularly due to the telecommunication sector, thereby absorbing the shock from the oil sector,” Abimbola said.

The oil sector contracted by 26.04 percent (year-on-year) in the first quarter of 2022 indicating a decrease of 23.83 percent points relative to the rate recorded in the corresponding quarter of 2021 while the non-oil sector grew 6.08 percent.

Analysts have however said the high growth rate seen in the first quarter of this year is due to the COVID 19-induced low growth, amongst other factors contributing factors, in the corresponding quarter of 2021 when the economy was still reeling from the pandemic.

“The low GDP growth in the first quarter of 2021, when the economy was still recovering from COVID-19, has provided a support to the seemingly high growth seen this year,” Olaolu Boboye, SSA economist and strategist at Cardinal Stone, said.

According to NBS, the non-oil sector was driven in the first quarter of 2022 mainly by the Information and Communication sector, Trade, Finance and Insurance, Agriculture and Manufacturing.

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The Information and Communication sector in real terms grew by 12.07 percent in the first quarter of 2022, an increase of 5.06 percent points from 7.28 percent in the same period last year while quarter-on-quarter, the sector grew by 9.09 percent points from 5.03 percent. The sector was majorly driven by the telecommunication industry.

The trade sector grew 8.97 percent points to 6.54 percent in the first quarter of 2022, from a contraction of 2.43 percent in the same period last year , and 1.20 percent points higher than the preceding quarter when 5.34 growth rate was recorded. Trade’s contribution to GDP was 16.13 percent compared to the 15.61 percent contribution in the previous year, and higher than the 15.66 percent recorded in the preceding quarter.

The financial services sector grew by 23.24 percent points in the first quarter of 2022, higher by 23.70 percent points from a contraction of 0.46 recorded in the first quarter of 2021 and down by 0.90 percent points from 24.14 percent recorded in the preceding quarter.

The contribution of finance and insurance to real GDP totaled 4.51 percent, higher than the contribution of 3.77 percent recorded in the first quarter of 2021

The agricultural sector in the first quarter of 2022 grew by 3.16 percent points, an increase of 0.88 percent points from the corresponding period of 2021 when 2.28 percent growth was recorded, and a decrease of 0.42 percent points from the preceding quarter when a growth rate of 3.58 percent was recorded.

However, the sector contributed 22.36 percent to overall GDP in real terms in the first quarter of 2022, higher than the contribution of 22.35 percent in the first quarter of 2021 and lower than the 26.84 percent fourth quarter contribution of 2021.

The real GDP growth in the manufacturing sector in the first quarter of 2022 was 5.89 percent, higher than the same quarter of 2021 by 2.49 points and higher than the preceding quarter by 3.61 percent points.

Its contribution to GDP in the first quarter of 2022 was 10.20 percent, higher than the 9.93 percent recorded in the first quarter of 2021 and higher than the 8.46 percent recorded in the fourth quarter of 2021.

“We project the growth will moderate to 2.9 percent level in the second quarter while there could be a 3 percent growth for the entire year,” Boboye said.

Stars of telecoms

Nigeria’s two largest telecommunication companies, MTN and Airtel, posted stellar performances in the first quarter of 2022.

According to Airtel Nigeria’s financial report, the total customer base of Airtel Nigeria increased to 44.4 million from 42.4 million the previous year, while data customer base increased by 14.9 percent to 20.3 million from 17.7 million the previous year.

Data gleaned from Nigerian Exchange Limited (NGX) showed Airtel Africa share price has grown by 53.93 percent year to date (YTD) from N1050.5 on January 5, 2022 to N1470 on May 23, 2022.

On the other hand, MTN Nigeria, the country’s largest company by revenues, also recorded remarkable growth.

Since a public offer last year, the company’s share price has grown by 26.4 percent to N249 as at May 23, 2022, from N197 on January 4, 2022.

“The approval of payment service banking licence for MTN and Airtel may well see both stocks continue to outperform through the year,” said Tajudeen Ibrahim, director of research at Lagos-based investment bank, Chapel Hill Denham.

According to MTN Nigeria’s first-quarter financial report ending March 2022, it recorded revenue growth of 22.2 percent to N470.98 billion from N388.32 billion in the same period last year.

Unlike Airtel Africa which recorded total revenue of $1.22 billion consisting of 41.5 percent of Airtel Nigeria’s revenue, first-quarter financial report showed MTN Nigeria recorded a growth of 22.2 percent to N470.98 billion from N388.32 billion in the same period last year.