The National Bureau of Statistics (NBS) had recently released the GDP figures for the first quarter as Nigeria’s economy sustained positive growth in the, with real GDP expanding by 2.98 per cent year-on-year (y/y).
This growth, while slightly below the 3.46 per cent recorded in Q4 2023, marks a notable achievement, particularly, given the economic challenges the country faces, as analysts say they expect the growth to close above 3.3 per cent by the end of this year.
While the Q1 growth figure was marginally above some analysts estimate of 2.88 per cent, it fell short of Bloomberg’s median consensus of 3.49 per cent. This performance highlights the resilience of Nigeria’s economy, underpinned by sectoral gains despite external and domestic pressures.
The oil sector continued to contribute positively to the GDP, growing by 5.70 per cent in Q1 2024, a deceleration from the 12.11 per cent y/y growth in Q4 2023. The sector’s contribution to the total GDP increased to 6.38 per cent, up from 4.70 per cent in the previous quarter. This growth was supported by a slight increase in average crude oil production, which rose to 1.54 million barrels per day (mb/d) from 1.53 mb/d in both Q4 2023 and Q1 2023.
Efforts by the Nigerian government to curb oil theft and vandalism have played a role in stabilizing production levels. However, the sector’s slower growth rate compared to the previous quarter underscores ongoing challenges in achieving more substantial and consistent gains.
The non-oil sector, which makes up the bulk of Nigeria’s GDP, grew by 2.80 per cent in Q1 2024, down from 3.07 per cent in Q4 2023. Despite this slowdown, the non-oil sector remains a critical driver of the economy, contributing 93.62 per cent to the total GDP.
Within the non-oil sector, the Services sector was particularly strong, growing by 4.32 per cent and contributing 58.04 per cent to the overall GDP. The Finance and Insurance sub-sector stood out, with a remarkable growth of 31.24 per cent, driven by the robust performance of financial institutions and ongoing investments in fintech and technology-driven services.
Agriculture, a vital component of the Nigerian economy, saw a minimal growth of 0.18 per cent, significantly down from the 2.10 per cent growth in Q4 2023. This sector contributed 21.07 per cent to the GDP. The subdued growth in agriculture reflects ongoing challenges such as insecurity, which continues to affect farming activities.
The industrial sector also experienced a slowdown, growing by 2.19 per cent in Q1 2024 compared to 3.86 per cent in the previous quarter. This sector’s contribution to GDP was 20.89 per cent. The modest growth in manufacturing and construction highlights the need for enhanced investment and policy support to boost industrial activities.
Looking ahead, analysts at Afrinvest West Africa remain cautiously optimistic, projecting a GDP growth of 3.0 per cent for the full year 2024. They highlight the ongoing reforms, security concerns, and exchange rate volatility as key factors that will shape Nigeria’s economic performance.
Analysts at Cowry Assets Management forecasts a 3.25 per cent real GDP growth in 2024, expecting accelerated growth in the oil sector due to a recovery in crude oil production, while also anticipating the normalisation of new government reforms and policies to drive growth in the non-oil sector, particularly, the Services sector.
“In our view, Nigeria’s economic growth remain robust with positive upsides despite several headwinds which comes on the back of insecurity challenges, high inflation rate and sluggish pace of economic activities. Nigeria’s economic growth has been forecast to remain subdued in the near term as current performance paints a nuance that the actual performance will depend on a complex of domestic and global economic factors. The intricacies of this outlook are shaped by a complex interplay of domestic and global economic factors.
“Pertinently, aggressive rate hikes by the central bank in response to escalating inflation, concurrently with fluctuating but upward-trending employment figures, dwindling daily crude oil production, and escalating debt levels, collectively contribute to Nigeria’s economic challenges.
“Additionally, the normalisation and permeation of new government reforms and policies are expected to propel growth in the non-oil sector, particularly supported by the Services sector. Overall, Cowry Research projects a 3.25 per cent year-on-year real GDP growth in 2024,” they pointed out.
Similarly, Cardinal Stone analysts project a 3.3 per cent growth for Q2 2024, driven by a low base effect and expected double-digit growth in the oil sector. They also foresee continued expansion in the non-oil sector, aided by technological
advancements and increased demand for digital services.
To analysts at Cordros Research, barring any significant shock the oil sector is expected to remain positive in Q2-24 partly due to the favourable base effects from the corresponding period of last year where oil production averaged 1.41mb/d.
“However, we expect the non-oil sector’s growth to settle lower than in Q1-24, in line with the near-term challenges arising from the renewed currency pressures, tight financial conditions, and elevated price pressures. That said, we project the economy will grow by 3.69 per cent in Q2-24,” they emphasised.
