The recently released Q4-20 GDP report by the National Bureau of Statistics (NBS) surprised positively as Nigeria narrowly exited its second recession in four years. The fourth quarter’s improvement in economic activities was quite remarkable as GDP grew by 0.11% y/y (Q3-20: -3.62% y/y), a marked deviation from the market’s expectation (Bloomberg’s median consensus forecast: -1.86% y/y).
The Q4-20 tally brought the full-year print to -1.92% (2019FY: +2.27% y/y). The positive, albeit marginal growth, in Q4 was primarily driven by the non-oil sector, reflecting more robust gains associated with the reopening of the economy than in the two preceding quarters.
Precisely, our attribution analysis showed that the positive contribution of the non-oil sector (+1.56%) to the overall GDP growth was enough to offset the negative contribution from the oil sector (-1.45%). Given the better-than-expected outturn in Q4-20, we have revised our estimate for Q1-21 and 2021FY growth upwards to 0.94% y/y and 2.75% y/y, respectively.
Compliance with OPEC+ production cuts dampen oil Sector performance
Like in Q3-20, Nigeria maintained compliance with OPEC+ production cuts while making amends for the overproduction in Q2-20. Juxtaposing the NBS oil production estimates for Nigeria with OPEC data, we highlight that condensate production averaged 190 kb/d in Q4-20 compared to 209 kb/d in Q4-19. Hence, the twin effects of compliance and lower condensate production led to a 22.0% y/y decline in overall oil production in Q4-20 to 1.56mb/d – the lowest since at least 2009 when the NBS started keeping the current data series.
Non-oil sector to the rescue
The non-oil sector was the needle mover, growing by 1.69% y/y vs a 2.51% contraction in Q3-20. For us, this reflects continued gains from the relaxation of social distancing measures unlike the previous two quarters (Q3-20: -2.51% I Q2-20: -6.05%) where output declined due to the limited movement of people and goods as well as few interactions in contact-intensive services-based industries.
Having factored in the upside and downside risks, we have revised our estimate for Q1-21 and 2021FY growth upwards to 0.94% y/y and 2.75% y/y, respectively.
(Cordros Research)
DISCLAIMER
The OPINION / COLUMN is authored by independent contributors to the National Accord Newspaper. While contributors adhere to our editorial guidelines, they are not employed by the National Accord Newspaper. The perspectives and opinions expressed herein are solely those of the author and do not represent the views of the National Accord Newspaper or its staff.
Leave a Reply