Nigerian economy grew by 2.55% in Q4 2019 – NBS

.This reflects an increase of 0.17%, highest rates since 2017-Dipeolu

.Without reforms, economic recovery would remain sluggish-Analysts

Nigeria’s economic growth rose to an annual rate of 2.55 per cent in the three months to the end of December, its highest quarterly growth since a 2016 recession, latest the figure released by the National Bureau of Statistics (NBS) has revealed.

When compared with the growth rate of 2018, which stood at 2.38 per cent, the 2019 figure recorded an increase of 0.17 per cent year on year.

The 2019 Gross Domestic Product (GDP) growth rate of 2.55 per cent translated to a 0.27 per cent increase over the third-quarter GDP of the year under review.

“The strong fourth quarter of 2019 growth rate also represented the highest quarterly growth performance since 2016 recession.

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“Overall, this resulted in annual 2019 real growth rate of 2.27 per cent, compared to 1.91 per cent in 2018. Quarter on quarter, real GDP growth was 5.59 per cent,” the NBS stated.

Commenting on this development, Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu in a statement said, “The Gross Domestic Product (GDP) grew by 2.55 per cent (year-on-year), in Q4 2019. This reflects an increase of 0.17 per cent over Q4 2018 (2.38%).

This figure is also an increase of 0.27 per cent compared to the preceding quarter (Q3 2019). Aggregate GDP stood at N39.5 trillion while in real terms, GDP is at N19.53 trillion in Q4 2019.

The growth in Q4 2019 is the highest rate since Nigeria came out of the recession in 2017. This feeds into the estimated overall GDP growth for 2019 which is 2.27 per cent.

This represents an increase in 2018’s growth rate of 0.36 per cent, and shows an improving the trend since the recession, of increasing growth in GDP. The non-oil sector contributed 92.68 per cent to GDP in the period with the oil sector contributing 7.32 per cent.

Giving the sectoral breakdown, he stated that the oil sector has seen an undulating trend over the past few years, the non-oil sector has a more stable and slightly upward growth trajectory. The non-oil sector’s contribution is on the back of Agriculture 26.1 per cent, Industries 20.27 per cent, and Services 53.64 per cent.

In the oil sector, Dipeolu said that an average production was 2 million barrels per day (2mbpd) in Q4 2019, adding that production remained consistently around this range in 2019.

According to him, the real growth of the oil sector in Q4 2019 was 6.36 per cent year-on-year (6.49% in Q3 2019).  For 2019, the oil sector recorded growth of 4.59 per cent (0.97% in Q4 2018). The non-oil sector grew by 2.26 per cent in real terms in Q4 2019. This is a slight reduction compared with 2.7 per cent in Q4 2018, but higher than 1.82 per cent in the previous quarter.

Meanwhile, the agriculture grew by 13.8 per cent in Q4 2019, which is lower than 18.58 per cent and 14.88 per cent recorded in Q4 2018 and Q3 2019.  Sector contribution is 22.12 per cent which is higher than recorded in 2018. Real growth in the sector was 2.31 per cent (year-on-year).

In Manufacturing, the growth is 26.29 per cent for the period, which is less than 33.57 per cent and 39.69 per cent in Q4 2018 and Q3 2019 respectively. Sector contribution is 11.37 per cent, which is higher than in the same period in 2018. The real GDP growth was 1.24 per cent (year on year).

The Information and Communication sector (Telecommunication mainly) recorded growth of 9.86 per cent in the period which is lower than 14.82 per cent and 10.99 per cent in Q4 2019 and Q3 2018 respectively. Sector contribution in 2019 was 10.68 per cent which is higher than in the same period in 2018. The real GDP growth was 8.5 per cent.

Finance and services sector grew at 23.3 per cent in nominal terms, which was higher than the preceding quarter and the similar period in 2018. The Sector’s annual contribution in 2019 was 2.93 per cent. In real terms, this growth was at 20.18 per cent. Economic growth is reflective of a healthy economy and points to the policies of the government towards specific priority sectors. The report shows that Nigeria is growing, even higher than some international analysts had predicted.

This growth can be attributed to the robust policies of the government to diversify the economy, renewed security efforts/reduced vandalism of pipelines and improved consumption/production of local goods (Rice), etc.

“Overall, the Nigerian economy performed reasonably despite external shocks, internal issues (border closure), tightening of monetary policy, and the Central Bank of Nigeria’s (CBN’s) continued defence of the Naira.

“There is also some improvement expected going forward with less volatility in oil prices, reduced effect of disease on crops (Lassa fever), more support to SMEs, early passage of the budget and continued diversification of the economy”, he explained.

But Afrinvest in a note to investors on the economic growth said, “The performance in Q4:2019 brings Full Year (FY) 2019 economic growth rate to 2.3 per cent, an improvement from 1.9 per cent in 2018 and over our revised forecast of 2.2 per cent.

Considering that growth is still short of long-term and population growth rates of 7.1 per cent and 2.7 per cent, there is little to cheer.

“The oil sector increased its contribution to growth in 2019, expanding 4.6 per cent from 1.0 per cent in 2018, following stability in the Niger-Delta and new output from the EGINA FPSO. In this regard, oil production rose 5.0 per cent to an average of 2.0mb/d in 2019. The non-oil sector remained the major driver of growth as it improved by 2.1 per cent in 2019, although this was little changed from 2.0 per cent in 2018.

“Aside from the ICT and agriculture sectors, there was a broad-based underperformance in major sub-sectors. In our view, this suggests that the economic recovery would continue at a sluggish pace without the implementation of reforms and market-friendly policies.

“The underlying reasons for the sluggish performance of the non-oil sub-sectors buttress our point. In the services sector, there was a faster expansion of 2.6% Y-o-Y in Q4:2019 from 1.9 per cent in the previous quarter while growth was 2.2 per cent in FY: 2019 from 1.8 per cent in 2018. While the ICT sector sustained its remarkable expansion, the trade and real estate sectors (22.1% of GDP) remained in a recession, although somewhat improving.

“In our view, the unfriendly trade policies of the government continue to affect the pace of recovery,” the organisation stated.

In the real estate sector, Afrinvest said that aside from the weak macroeconomic environment, poor investment in housing, the lack of flexible regulations around land use and registration as well as expensive and slow approvals of building permits are critical factors.

More so, in the agriculture sector, growth was faster at 2.4 per cent in 2019 from 2.1 per cent in 2018, but weaker than its long-term average of 3-4.0 per cent. Beyond cheap credit, there has been little progress towards boosting agriculture yields, helping farmers adapt to a changing climate and curbing insecurity.

In manufacturing, the weakness in consumer purchasing power remains the major theme as growth slowed to 0.8 per cent in 2019 from 2.1 per cent in 2018. On the other hand, the financial services sector surged 22.3 per cent in Q4:2019, the highest growth recorded in a quarter.

“Similarly, the sector grew faster at 2.4 per cent in 2019 from 1.4 per cent in 2018. We suspect this was driven by the raft of policies rolled out by the CBN in H2:2019, particularly the 65.0 per cent increase in Loan-to-deposit ratio. We retain our growth forecast of 2.4 per cent for 2020 as we do not expect significant improvements”, analysts at Afrinvest explained.