The National Bureau of Statistics (NBS) last week released the growth rate of the Gross Domestic Product (GDP) showing a slower economic growth in the third quarter of the year. Data released showed that Nigeria’s GDP grew by 2.25 per cent year-on-year in real terms in the third quarter of 2022.
This is a slower growth compared to 4.03 per cent growth in the third quarter of 2021 and 3.45 per cent in the second quarter of 2022 as aggregate GDP stood at N52.255 trillion in nominal terms. According to the NBS, the reduction in growth is attributable to the base effects of the recession and the challenging economic conditions that have impeded productive activities.
The non-oil sector grew at a slower rate of 4.27 per cent compared to 4.77 per cent recorded in the second quarter of the year. On an attribution basis, the Services and Agriculture sectors contributed 3.48 and 0.40 per cents, respectively, to GDP growth. In parallel, Industries which contracted by -1.63 per cent contributed negatively to the GDP growth.
Data showed that the oil sector growth declined by 22.67 per cent in line with the persistent production challenges facing the sector. Crude oil production fell to a new record low of 1.20 million barrels per day compared to 1.43mb/d recorded in the second quarter of the year, which is 34.4 per cent below the country’s OPEC+ production quota of 1.83mb/d during the review period.
According to analysts, the persistent low crude oil production volume reflects the passthrough impact of age-long infrastructural deficit, massive oil theft and pipeline sabotage and IOC divestments, given the challenging business environment and the move to cleaner energy sources.
CBN Stance
Governor of the Central Bank of Nigeria(CBN), Mr. Godwin Emefiele had noted that with the massive oil theft in the country, foreign exchange earnings from the oil sector is near zero as he is optimistic that the non-oil sector will continue to contribute to the growth of the economy.
Despite the slowing growth, Emefiele believes that the Nigerian economy will record a growth of 3.47 per cent by the end of the year and sustain a positive note into 2023. “Based on the expectation of a robust non-oil performance, and barring any unforeseen shocks, GDP growth rate is projected to remain positive in the remaining quarter of 2022 and during 2023.
“The performance of the non-oil sector will be buoyed by the continued efforts at entrenching indigenous productivity in high-impact real sector activities, especially agriculture, MSMEs, and manufacturing. Domestic aggregate demand is further expected to be bolstered by the anticipated budgetary outlay and the surge of electioneering spending in the next few months” the CBN governor stated.
Analysts Optimism
Likewise, analysts at Afrinvest West Africa are of the view that growth rate in the country will remain above three per cent by the end of the year, projecting a 3.65 per cent growth rate for the last quarter of 2022. The analysts in an emailed not said “we maintain our 3.3 per cent GDP growth projection for 2022 considering an expected growth of at least 3.65 per cent in Q4:2022.
“This is on the back of sustained supportive growth from the ICT sector as digitization drive would continue to support impressive performance. Likewise, pre-election spending and year-end activities pose an optimistic outlook for the road transport, trade, and financial sectors.
“On the contrary, we envisage that there would be no material improvement in the oil GDP as the woes that plague the sector persists. However, key downside risks to our projections include intensified monetary tightening, demand disruption effect of the currency redesign, spiraling inflation, worsening foreign exchange illiquidity, increased insecurities, and adverse weather events.
The analysts, commenting on the Q3 GDP growth rate, had noted that the moderation in the GDP growth rate can be attributed to the impact of monetary tightening to curb runaway inflation, foreign exchange illiquidity impact on real sector activities, base year effect, and the sustained spillover effect of Eastern Europe crisis on input prices.
However, analysts at Cordros Reseach are not so optimistic, saying, they expect a slower growth for the economy in the fourth quarter of the year.
“We expect the economy to grow by 2.14 per cent year on year in Q4-22”, the analysts stated. While we acknowledge the government’s recent efforts at combating oil theft, we expect crude oil production to remain underwhelming in the short term, given that the existing production challenges linger. Accordingly, we expect crude oil production to settle at 1.35mb/d in Q4-22, translating to an oil GDP decline of 10 per cent.
