City in Nigeria

Nigeria GDP Q4 2021

Nigeria: Economic growth stabilizes but economy exceeds pre-pandemic level

Economic growth was unchanged in the fourth quarter, with GDP increasing 4.0% on an annual basis (Q3: +4.0% year-on-year). Q4’s reading marked the fifth consecutive quarter of expanding output since the pandemic-induced recession in early 2020. Moreover, the economy exceeded pre-pandemic levels in the final quarter of last year. Looking at the year a whole, the economy increased 3.4% in 2021 over the prior year (2020: -1.9%). This marked the strongest pace of growth since 2014.

The stable quarterly reading reflected a softer contraction in the key oil sector, offsetting cooling momentum in the non-oil sector. Output in the oil sector dropped 8.1% year-on-year in Q4 (Q3: -10.7% yoy), in part due lower oil production. Output of the black gold halted at 1.50 million barrels per day (mbpd) in the fourth quarter, which was down from the 1.57 mbpd recorded in the third. Turning to the non-oil sector, activity rose 4.7% year-on-year in the fourth quarter, down from the 5.4% expansion logged in the third. This came on the back of softer growth in the services sector, which expanded 7.1% annually in the fourth quarter (Q3: +12.3% yoy) and offset a weaker contraction in the industrial sector (Q4: -1.2% yoy; Q3: -3.1% yoy) as well as stronger growth in the agricultural sector (Q4: +3.6% yoy; Q3: +1.2% yoy).

Turning to this year, the economy is forecast to grow at a softer pace, partly due to a less favorable base of comparison. Domestic and foreign demand should firm, however, amid easing Covid-19 restrictions and progressing vaccination efforts. The Petroleum Industry Bill should buoy foreign capital inflows and fixed investment, eventually trickling down to the broader economy. That said, the country’s low vaccination rate will likely mean that Covid-19 restrictions remain a feature of the economy in some capacity. The outlook is furthermore weighed down by uncertain vaccine availability, the potential for more transmissible variants, elevated unemployment, high inflation, security issues and social tensions.

Analyst at the EIU added:

“Real exports are expected to recover from a two-year slump as technical and maintenance issues that brought crude production to a multi-decade low in 2021 are rectified. A more stable foreign-exchange market should also calm business uncertainties across the economy. This will be accompanied by direct CBN lending schemes and other measures (notably a minimum loan/deposit ratio for banks) that will channel funds to credit-hungry sectors, such as agriculture and manufacturing, although both have deep-rooted shortcomings that will limit long-term productivity gains. These include power shortages, instability, a lack of formal land titling in agricultural areas and import restrictions. A mega-refinery that is expected to come on stream in 2022 will be ramped up in 2023, further boosting net exports.”

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