Nigeria’s economy defies rising inflation, expands 2.99% in Q1

The Nigerian economy expanded by 2.98 per cent year-on-year (y/y) in real terms in the first quarter of 2024.

Analysts at Afrinvest said the growth is close to its base case projection of 2.93 per cent.

They however noted that the growth rate on a quarter-on-quarter (q/q) trailed the 3.54 per cent recorded in the fourth quarter of 2023. 

“The first quarter growth performance was supported in part by the sustained recovery in the oil economy which grew 5.7 per cent as against a 4.2 per cent contraction in the first quarter of 2023, reflecting the modest improvement in average crude oil production to 1.57mbpd as against 1.51mbpd in the corresponding period of 2023”, said analysts at Afrinvest.

On the other hand, the non-oil economy grew 2.80% compared to 2.77 per cent in the first quarter of 2023, nonetheless underperformed the fourth quarter of 2023 growth of 3.07 per cent. In all, the share of the oil economy rose to 6.38 per cent from 6.21 per cent in the first quarter of 2023, while the share of the non-oil economy compressed mildly by 16bps y/y to 93.62 per cent.

From a structural viewpoint, the Services sector was dominant (up 4.3 per cent y/y), with the Agriculture (up 0.2 per cent y/y) and Industries (up 2.2 per cent y/y) sectors offering support to the overall growth print. Specifically, the growth in the Services sector was buoyed by expansion in the Finance & Insurance sector (up 31.2 per cent y/y), reflecting the impressive first quarter outing of publicly listed financial institutions (stand-alone sector growth was 33.3 per cent y/y).

Meanwhile, the Information & Communications sector (17.5 per cent of GDP) rose 5.4 per cent y/y in real terms, although on a quarterly basis, growth declined 9.9 per cent as telcos implement the mandatory NIN-SIM linkage which led to a contraction in subscriber base (down 2.3 per cent to 219.2 million in the first quarter of 2024).

Meanwhile, Trade expanded slightly by 1.2 per cent in the first quarter of 2024, though it fell 8bps y/y as businesses and households continue to deal with the impact of inflationary pressure (April’ 2024: 33.7 per cent) and a volatile foreign exchange market (NGN down c.32.5 per cent in the first quarter of 2024) despite CBN interventions.

“Looking ahead, we maintain our conservative growth projection of 3.0 per cent for the full year 2024. This cautious stance is informed by the lingering impacts of ongoing reforms on growth potentials, challenging business environment, protracted security concerns, exchange rate volatility, dwindling Agric sector growth (the minuscule growth in the first quarter is the lowest since negative print of 0.9 per cent in the first quarter of 2023), and mounting risk in the external environment”, said Afrinvest.

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