Nigeria’s real GDP growth improved in the third quarter on the back of higher oil production as well as an increase in non-oil GDP growth. Real GDP at factor cost expanded by 6.81% y-o-y in the third quarter of 2013, up from 6.18% y-o-y in Q2 and 6.56% y-o-y in Q1. The crude petroleum & natural gas sector contracted by 0.5% y-o-y in Q3, which was an improvement from the previous quarter’s contraction of -1.15% y-o-y. According to the National Bureau of Statistics (NBS), average oil production reached 2.26 million bpd in Q3, up from 2.11 million bpd in Q2. The increase was driven by the re-opening of three major pipelines. Growth in real non-oil GDP increased to 7.95% y-o-y in the third quarter from 7.36% y-o-y in Q2. This was driven by improved performances in the agricultural sector, banking, trade, and construction. Higher agricultural sector growth was partly caused by base effects given flooding in Q3 of last year. Better availability of agricultural produce also aided an improved performance in wholesale & retail trade as well as agro-manufacturing. Apart from food, other types of manufacturing also did well in Q3 (particularly cement and oil), thereby resulting in an overall growth rate in the sector of 8.16% y-o-y, up from 6.81% y-o-y in Q2.
WHY DO WE CARE? The NBS is due to release rebased GDP figures for Nigeria in December. The process is widely expected to result in a large upward adjustment in Nigeria’s GDP, with the West African nation projected to overtake South Africa as the largest economy on the continent in due course. With the Nigerian economy growing at a much more rapid pace, South Africa will struggle to reclaim pole position. In terms of the composition of GDP, the size of the services industry is expected to increase due to the emergence of new sectors, while that of agriculture will likely decrease, as it is currently believed to be overestimated. The key for Nigeria is to make economic growth more inclusive, so that poverty declines and purchasing power increases. Nigeria has a good opportunity to develop its manufacturing sector, and this would go a long way towards making gains in GDP growth more tangible and equitable. However, for this to happen, the quality of infrastructure and the ease of doing business have to improve drastically. Another big concern is corruption, and the extent to which it drains economic gains, with only a small political elite benefiting.
Analyst: Melissa Verreynne