Barring any policy summersaults and sharp decline in oil proceeds, Nigeria’s real Gross Domestic Product, GDP, will attain full recovery in two years, with growth moving closer to its long-term trend of 6.7 per cent, projects PricewaterhouseCoopers, PwC, Nigeria Limited.
In its recent economic bulletin: “Nigeria’s Q2’17 GDP: From Recession to Recovery,” PwC stated that the latest GDP figures released by the National Bureau of Statistics, NBS, indicated that Nigeria’s economy had exited recession.
The reported co-authored by Andrew S Nevin, PwC’s partner & chief economist and Adedayo Akinbiyi, economist, said in Q2 2017, Nigeria’s economy returned to positive growth as real GDP grew 0.5 per cent year-on-year(y/y) after successive declines for five quarters.
The report noted that this recovery was supported by a strong rebound in the oil sector (8.8 per cent of GDP), which expanded by 1.6 per cent y/y (–15.6 per cent y/y in Q1 2017).
The report said the non-oil sector on the other hand was boosted by a strengthening of the broader manufacturing sector, reflecting impact of improved foreign exchange liquidity. “We note that the Q1 2017 real GDP growth was revised down to -0.9 per cent y/y (previous: -0.5 per cent y/y); a revision necessitated by lower than estimated oil production figures for March 2017, which dragged oil output lower,” said the report.
In its analysis and projections for the future, PwC said that agriculture decelerated on grain scarcity and expanded at a slower pace for the fifth consecutive quarter, recording a growth of 3.0 per cent y/y in Q2 2017 (Q1’1 7 : 3.4 per cent and Q2 2016: 4.5 per cent). “This trend has been driven mainly by weaker output in the livestock and fishing sub-sectors, resulting from the scarcity of grains. In addition, we suspect the second quarter resurgence in insecurity in the North East might have negatively impacted crop production activities,” said the report.
It also said manufacturing expanded at a slower pace for the second consecutive quarter. Real growth increased by 0.6 per cent y/y in Q2 2017, relative to -3.3 per cent y/y a year earlier. Relative to Q1 2017, however, growth slowed from 1.3 per cent y/y, a reflection of the performance of sector heavy weights, food, beverage and tobacco and cement, which accounted for 54.0 per cent of manufacturing GDP.
“Whilst the broader sector appears to have benefitted from the improved availability of forex, we suspect the price increases implemented across most consumer companies in the course of the year might have impacted volumes. Nonetheless, quarterly data (Q2 2017:1.0 per cent q/q vs Q1 2017: -5.0 per cent q/q) suggests the consumer recovery remains underway, albeit fragile,” said PwC.
The firm was emphatic that GDP will remain unchanged at 0.7 per cent y/y in 2017. “To attain this growth forecast, we estimate that real GDP will expand by 1.8 per cent y/y in Q3 2017 and 1.1 per cent y/y in Q4 2017. This is plausible, given our expectation of a strong harvest season and sustained FX liquidity, which should support a broad-based economic recovery,” PwC said.
But the firm insisted that there were risks such as decline in oil price and production, and policy disruptions that could make the projections unattainable as they affect investments in the economy.