Nigeria: Economic growth slows in Q1, but the economy still exceeds pre-pandemic level
The pace of growth in Sub-Saharan Africa’s largest economy lost some steam in the opening quarter of this year, but remained healthy nonetheless. In the three months ending in March, the economy expanded 3.1% year on year. This was down from the fourth quarter’s 3.4% expansion.
The moderation in the headline reading came chiefly on the back of a deterioration in the oil sector, which offset firmer activity in the non-oil sector. The oil sector’s output tumbled 26.0% year on year in Q1 compared to the same quarter a year prior. Oil production eased from 1.56 million barrels per day (mbpd) in Q1 2021 to 1.49 mbpd in Q1 2022. The non-oil sector—which has been the main driver of growth since the economy exited its recession in late 2020—grew 6.1% year on year in the first quarter of 2022, which was up from the 4.4% expansion logged in the prior period. This came mainly on the back of stronger growth in the services sector (Q1 2022: +7.4% yoy; Q4 2021: +5.6% yoy). Growth in the agricultural sector moderated (Q1 2022: +3.2% yoy; Q4 2021: +3.6% yoy), while industrial output contracted markedly in the period (Q1 2022: -6.8%; Q4 2021: 0.0% yoy).
While the economy continued to post a decent growth rate in the first quarter, numerous headwinds remain. A slow domestic vaccination drive will see Covid-19 remain a feature of the economy in some capacity. Elevated unemployment and a weakened currency, particularly on the black market, are constraints to private consumption, and high inflation also weighs on the economy. Meanwhile, security issues and social tensions continue to pose downside risks. Recurrent vandalism as well as illegal refining in the oil-producing region of the country have dented the oil sector, which has been unable to meet its output targets and thus fully benefit from the spiraling oil prices since the start of the war in Ukraine. More positively, the removal of Covid-19 restrictions should buoy activity; PMI data highlights a fairly robust start to the second quarter.
Analysts at the EIU added:
“We expect real GDP growth to slow from 3.6% in 2021 to 3% in 2022. This will stem from continued erosion of household purchasing power by inflation, monetary tightening and power-supply issues, and low water levels and inadequate gas supply will reduce power generation.”