Economy: Services, telecoms, to pick up in H2 ….Bloomberg Forecasts growth by 1-1.5 % in 2017

Irrespective of the sharp decline in Nigeria’s telecommunications’ sector in second quarter 2017, the nation’s economy has been projected to grow in 2017 by between 1 per cent and 1.5 per cent, Bloomberg’s Intelligence report said.

In its recent report titled “recovery at mercy of telecoms ‘wild card” made available to Daily Times Nigeria, Bloomberg Intelligence noted that though rise in oil production drove Nigeria’s economic growth in second quarter, however a sharp decline in earnings from the telecoms sector explains a large part of the weakness in service-sector growth.

According to the report, a seasonal adjustment by BI Economics showed that Nigeria’s economy expanded by 0.7 per cent quarter-over-quarter in 2Q, but was almost entirely because of higher oil output, while the non-oil sector remained flat.

The report said that decline in output from telecoms stalled growth, irrespective of improvement in oil production.” This should ease in 2H while higher oil revenue may help the construction and real estate sectors to recover” said the report.

As a result, Bloomberg’s Intelligence Economics maintained that it still expects Nigeria’s economy to expand by 1-1.5 per cent in 2017 as a whole, but the trajectory of the telecoms; industry will be the wild card for second-half growth.

Nigeria’s real GDP rose by 0.55% year-over-year in 2Q, missing the median forecast of economists of 1.3% in a Bloomberg News survey.

Part of the shortfall can be explained by a revision to 1Q growth to -0.91% from -0.52% previously, largely because of a downward adjustment to oil and gas GDP in the quarter.

According to the report, a seasonal adjustment by BI Economics showed the economy expanding by 0.7 per cent quarter-over-quarter in 2Q, but this was almost entirely because of higher oil output with the non-oil sector flatlining.

It pointed that the service sector shrank 0.8 per cent in 2Q, raising doubts about to what extent the economy is recovering beyond the increase in oil output.

The service sector performance, according to the report, showed contraction by -2.9 per cent in the telecom sector, which constitutes around 9% of total services GDP. Telecoms had previously shown more resilience to the sharp drop in oil revenue since mid-2015 than other sub-sectors in the category.

“It’s unclear to what extent this collapse in telecom output in 2Q is related to regulatory efforts to deactivate improperly registered mobile phone users, partly due to security concerns. MTN Group Ltd” pointed the report.

Africa’s largest mobile-network operator by sales, removed about 7-8 million subscribers that weren’t considered active. It remains to be seen to what extent these removals continued in 3Q, or how it will affect telecom revenue during the quarter. Excluding telecoms, service-sector growth was still negative in 2Q, albeit not on a deteriorating trend.

A recovery in telecoms output, the report pointed may boost service-sector growth in 2H. The real estate and constructions industries could also support growth. The two sectors combined account for about 11% of current GDP and as such have a larger direct impact on real GDP growth than the crude petroleum and natural gas sector.