Nigeria: Economy shifts into lower gear at the start of 2019
Nigeria’s economy entered 2019 on a softer note, with GDP growth decelerating to 2.0% on an annual basis in the first quarter. This was below both what market analysts had expected and the fourth quarter’s 2.4% expansion, which had marked an over three-year high. The slowdown was driven by both weakening momentum in the non-oil segment of the economy and the vital oil sector contracting yet again.
Growth in the non-oil sector of the economy moderated in the first quarter, coming in at 2.5% annually (Q4: +2.7% year-on-year) and reflecting slower growth in both the industrial and services sectors. Industrial output growth practically stagnated in Q1, largely due to weaker gains in manufacturing production compared to Q4. Similarly, the services sector lost steam, with growth weighed on by softer activity in the information and communication, and trade industries. On the other hand, output in the agricultural sector picked up in Q1, buoyed by higher crop production.
Meanwhile, the all-important energy sector contracted for the fourth consecutive quarter in Q1. Activity in the oil sector fell 2.4% over the same period last year, after tumbling 1.6% in Q4 2018. This was despite oil production—which accounts for the lion’s share of the overall mining and quarrying sector output—recovering to a one-year high of 1.96 million barrels per day (mbpd) in Q1 (Q4: 1.91 mbpd) and rising global oil prices throughout the quarter.
Looking ahead, the ongoing recovery is expected to gather pace this year, supported by higher private consumption, which should be buoyed by the minimum wage hike, and healthy investment activity amid more accommodative monetary conditions and waning post-election uncertainty. The slow implementation of reforms, commodity-price volatility and potential disruptions to oil production pose key risks to the outlook.