Nigeria: Economy loses steam in Q2
The economy shifted into a lower gear in the second quarter, with annual GDP growth decelerating to 1.9% from an upwardly revised 2.1% in the first quarter (previously reported: +2.0% year-on-year). The moderation was mainly driven by weakening momentum in the non-oil segment of the economy, which expanded at the softest pace in a year. That said, the vital oil sector recovered strongly in the quarter, cushioning the overall slowdown.
Growth in the non-oil sector of the economy eased sharply in Q2, coming in at 1.6% annually (Q1: +2.5% year-on-year) and reflecting faltering activity in both the agriculture and services sectors. Agricultural output growth nearly halved in Q2 amid softer crop production and a stagnant livestock sector. Similarly, declining activity in the trade, real estate, and finance and insurance industries stifled the overall expansion of the services sector. In contrast, industrial output growth picked up markedly in Q2, driven mainly by the recovery of the mining and quarrying sector.
Most notably, the all-important energy sector returned to growth in Q2, after contracting for four consecutive quarters. Activity in the oil sector rose a robust 5.2% over the same period last year, rebounding from the 1.5% fall in Q1. This came on the back of oil production—which accounts for the largest share of overall mining and quarrying sector output—remaining relatively elevated at 1.98 million barrels per day (mbpd) in Q2 (Q1: 1.99 mbpd) and rising oil prices during the first half of the quarter.
Growth is projected to accelerate slightly this year compared to 2018 amid the ongoing economic recovery. The full roll-out of the minimum wage and measures to stimulate bank lending should lend support to domestic demand. That said, a weaker global economy, power shortages, potential disruptions to oil production and slow pace of reforms dampen the outlook.