RenCap raises to 0.7% Nigeria’s DGP growth forecast

Following the NBS report that Nigeria has navigated itself out of recession, investment outfits have continue to take fresh look into projected growth of the nation’s economy in 2017.

One of such outfits, Renaissance Capital, has raised its forecast Gross Domestic Product growth for the economy to 0.7 per cent from earlier 0.5 per cent forecast. However, the target growth could be hampered by developments.

In a report titled: “Nigeria: 2Q17 GDP, A pedestrian recovery,” arranged by Yvonne Mhango, SSA Economist, the company noted that irrespective of the elevated projected GDP growth, the non-oil sector’s recovery will be inhibited by sluggish demand, which is reflected in YoY credit growth of -0.1 per cent in July, against 19.9 per cent a year earlier .

According to the RenCap, “Owing to a more favourable outlook for oil output, we revise our 2017 growth forecast up to 0.7 per cent vs 0.5 per cent previously. However, sluggish demand leads us to believe the recovery will be pedestrian.” However, “The downside risk to our growth outlook is a resumption in attacks on oil facilities that results in output falling” the research work cautioned.

The research hinged its upward GDP growth review on Nigeria’s 0.5 per cent growth YoY in 2Q17 vs -1.5% YoY a year earlier. According to the report, the oil & gas and financial services sectors pulled the economy out of recession.
“Outside agriculture, the non-oil sector remains weak. This is mainly because real estate and trade, which account for 25 per cent of GDP, are still in recession” pointed the report.

The company noted that the Oil sector pulled the nation’s economy out of recession, attributing it to repair of the Trans-Forcados pipeline, which led to output of c. 200k b/d coming back on stream in June, and the tripling of the budget for the amnesty

programme for Niger Delta militants, partly explain the improvement in oil output.
Nigeria’s oil & gas sector grew in 2Q17, after contracting for six quarters. The extractive sector grew 1.6% YoY vs -11.6% YoY a year earlier, on the back of an increase in oil production to an average of 1.9mn b/d, vs 1.8mn b/d over the same period (Figure 4).
The non-oil sector grew by a modest 1.1% YoY in 2Q17, compared with -0.4% YoY a year earlier. The finance sector grew 11.8% YoY in 2Q17, vs a decline of 13.2% a year earlier, emerging as the second-biggest contributor to GDP growth in 2Q17.

Bonny Amadi