Nigeria: Growth plummets in Q2 on falling oil production
August 27, 2018
Nigeria’s recovery lost momentum in the second quarter, with growth falling to a one-year low. According to data released by the National Bureau of Statistics (NBS), GDP expanded 1.5% annually in Q2, below Q1’s 2.0% increase. The slowdown was driven by a weak performance in the country’s all-important energy sector, while growth picked up in the non-oil segment of the economy.
The oil sector recorded the worst result since Q1 2017 in the second quarter, with activity falling 4.0% over the same period last year (Q1: +17.8% year-on-year). Declining oil production drove the sector’s deterioration, with oil output dropping to 1.84 million barrels per day (mbpd) in Q2 (Q1: 2.00 mbpd). Oil pipeline disruptions throughout the quarter hampered the country’s production capability, highlighted by major-producer Royal Dutch Shell declaring a force majeure on Bonny Light exports in mid-May. That said, firmer energy prices helped buffer the slowdown in the second quarter.
Meanwhile, activity in the non-oil sector of the economy accelerated in the second quarter, growing 2.1% annually (Q1: +0.7% yoy). Faster growth in services fueled momentum, particularly in telecommunications. Conversely, the agricultural and manufacturing sectors lost steam in the second quarter. Crop production was notably weak in the quarter, likely weighed on by the ongoing farmers and herdsmen conflict.
Looking ahead, the recovery is expected to regain some momentum in the coming quarters but remain modest overall. While firm oil prices, improved production and greater foreign exchange rate liquidity should buttress momentum, several challenges to the outlook persist. Heightened political uncertainty ahead of the 2019 elections, a weak business climate and a lack of structural reforms continue to cast a shadow over the country’s prospects.
Nigeria GDP Forecast
FocusEconomics panelists project that the economy will grow 2.4% in 2018, unchanged from last month’s forecast. In 2019, growth is seen rising to 2.9%.