Outside oil sector, ICT growth still disappointing


There was some of growth by the end of the year, 2019. But areas where so much has been expected from still Lagos.

Though economic growth rate brought growth for the year 2019 to 2.3 per cent from 1.9 percent in. 2018, the slow growth in agriculture and other areas where government has invested heavily is a major concern.

The performance in the fourth quarter of 2019 brings 2019 economic growth rate to 2.3 per cent, an improvement from 1.9 percent in 2018 and over our revised forecast of 2.2 per cent. Considering that growth is still below 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 2.1 per cent in 2019, although this was little changed from 2.per cent in 2018. Aside 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.

Stakeholders expect the non-oil actor to grow much more following investment and interest on it in recent times.

In the services sector, there was a faster expansion of 2.6 per cent Y-o-Y in Q4:2019 from 1.9 per cent in the previous quarter while growth was 2.2 per cent in 2019 from 1.8 per cent in 2018.

The ICT sector sustained double-digit growth at 11.1 per cent in 2019 from 9.7 per cent in 2018, which is due to the necessity of its services. While the ICT sector sustained its remarkable expansion, the trade and real estate sectors (22.1 per cent of GDP) remained in recession, although somewhat improving.

The trade and real estate sectors contracted 0.4 per cent and 2.4 per cent in 2019 respectively from 0.6 per cent and 4.7 per cent in 2018. Analysts say the unfriendly trade policies of government continue to affect the pace of recovery. In the real estate sector, aside 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.

On the other hand, the financial services sector surged 22.3 per cent in the fourth quarter of 2019 from 0.6 per cent in the previous quarter, the strongest growth rate on record.

On an annual terms, the sector also improved as it grew faster at 2.4 per cent from 1.4 per cent in 2018.

“We suspect that this performance was driven by the policies of the CBN in second half of 2019, particularly the introduction of the minimum Loan-to-deposit ratio of 65.0 per cent.

The agriculture sector grew at an unchanged pace of 2.3 per cent in the fourth quarter of 2019 compared with the previous quarter. However, growth was faster at 2.4 per cent in 2019 from 2.1 per cent in 2018. The sector continues to perform below its long-term average of 3-4.0 per cent.
Crop production expanded 2.5 per cent in 2019 relative to 2.3 per cent in 2018 but growth was slower for livestock production at 0.2 per cent in 2019 from 0.3 per cent in 2018. Beyond cheap credit, there has been little progress towards boosting agriculture yields, helping farmers adapt to a changing climate and curbing insecurity. Hence, we expect sustained underperformance in the sector.

In the manufacturing sector, 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. Growth in the food, beverage and tobacco sub-sector slowed to 2.2 per cent from 2.9 per cent in 2018, while the textile, apparel footwear subsector contracted 0.1 per cent in 2019 from 1.7 per cent in 2018.

Also, growth in the cement and construction sub-sectors was slower at 3.1 per cent and 1.8 per cent in 2019 (from 4.5 per cent and 2.3 per cent in 2018) respectively, reflecting poor infrastructure investment.

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