Nigeria: Recovery strengthens in Q3 on higher oil production
November 22, 2017
Nigeria’s economy gained traction in the third quarter, after growing for the first time in over a year in Q2. According to data released by the National Bureau of Statistics, GDP expanded 1.4% annually in Q3, notably above Q2’s revised 0.7% increase (previously reported: +0.6% year-on-year). Higher oil production drove the acceleration in Q3, which was also likely aided by increased public spending and an improved exchange rate provision.
Oil output averaged 2.03 million barrels per day (mbpd) in the third quarter, which was above the revised 1.87 mbpd recorded in Q2 (previously reported: 1.84 mbpd). Greater production combined with higher oil prices drove the oil sector to grow by a robust 25.9% annually, significantly above Q2’s 3.5% expansion. Oil production largely returned to normal in Q3, after the completion of repair work earlier in the year. In addition, an improved security situation in the key oil-producing Niger Delta region helped stabilize output. However, the situation in the Niger Delta remains uneasy and violence could flare up again, especially in the run-up to the 2019 election.
In the non-oil sector, activity contracted 0.8%, contrasting Q2’s 0.5% expansion. Shrinking activity in the service sector was chiefly behind the fall. The poor result in the non-oil sector highlights the overall weak state of economic activity and reliance on natural resources for growth. Stubbornly high inflation has eroded consumers’ purchasing power, which, combined with high unemployment and a poor business environment, is hindering economic momentum.
Looking ahead, dynamics in the oil sector, along with the implementation of policy measures as part of the government’s ambitious 2018 budget, will be key to stoking a faster recovery. The record NGN 8.6 trillion (approximately USD 28.2 billion) budget focuses on capital spending and could help improve badly needed infrastructure in the country. However, there is uncertainty over its implementation, as the government has previously fallen short on both revenue and expenditure targets.
Nigeria GDP Forecast
FocusEconomics panelists project that the economy will grow 2.6% in 2018, unchanged from last month’s forecast. In 2019, growth is seen rising to 2.9%.