The National Bureau of Statistics (NBS) on Monday released Nigeria’s Gross Domestic Product (GDP) report for the second quarter of 2018. GDP is a monetary measure of the market value of all final goods and services produced in a period of time.
According to the report, GDP grew by 1.50% year on year in real terms to N16.58 trillion in Q2 2018. Although, the figures show that the Nigerian economy has maintained is positive growth since exiting recession and also shows a stronger growth of 0.79%, when compared to the same period last year which was 0.72%; however, the figures also confirmed that the economy has slowed down by 0.45% from the growth rate of 1.95% recorded in the previous quarter of Q1 2018.
Oil Sector GDP
The report shows that the oil sector contributed 8.55% to the total real GDP during the period under review. This is a reduction on both quarter on quarter and year on year bases, as the sector contributed 9.61% in Q1 2018 and 9.04% in the corresponding quarter of 2017 respectively.
Meanwhile, the report further reveals that average daily crude oil production in Q2 2018 was 1.84 million barrels per day – which is a reduction from the oil production in the first quarter 2018. Oil production in the period under review was also relatively lower to the corresponding quarter of 2017 by 0.03 million barrels per day when output was recorded at 1.87 million barrels per day.
The reduction in the oil sector GDP can be directly linked to the slight decline in the crude oil price – which fell to $74.4 per barrel in June, after maintaining a steady rise in January ($65.32 per barrel) before hitting $76.98 in May.
Non Oil GDP
According to NBS report, the non-oil sector recorded a Real growth of 2.05% in the second quarter of 2018 which is a year on year growth of 1.60% and quarter on quarter growth of 1.29%. This growth was mainly driven by Information and Communication Sector. The sector grew by 11.81% from the growth rate of 1.58% recorded in the first quarter of 2018. Information and Communication Sector was followed by Construction, Agriculture, Transportation and Storage and Other Services.
Overall, the Non-Oil sector contributed 91.45% to the GDP in the second quarter of 2018 which is an increase from its contribution of 90.39% in the previous quarter. The non-oil contribution also rose on year on year basis from 90.96% recorded in the same quarter of 2017.
Other critical sectors of the economy such as manufacturing, Agriculture and Finance recorded declining GDP growth rates in the quarter under review. For example, although, Manufacturing grew by 0.68% on year on year basis, but the figure reduced by -2.71% from that of the previous quarter of Q1 2018 which was 3.39%. Financial and Insurance sector also slumped to 1.28% from 13.30% in Q1 2018 while Agricultural Sector fell to 1.19% from 3.00% in the previous quarter. Also, trade contracted by -2.14% in Q2 2018 from -2.57% in the first quarter of 2018.
However, some sectors posted positive growths in the second quarter of 2018: Construction grew tremendously to 7.66% compared to -1.54% recorded in the previous quarter while Transport and Storage also recorded a GDP growth of 21% from 14.45% in Q1 2018.
Why growth rate fell
According to the National Bureau of Statistics, the slower second-quarter GDP growth rate is attributed to two main sectors, Agriculture and Mining.
For the first time since the exit from recession, growth was driven by the non-oil sector which grew by 2.05% representing the strongest growth in non-oil GDP since Q4 2015. Non-oil GDP growth which was -0.18% in Q1 2016, -0.38% in Q2 2016, 0.03% in Q3 2016, -0.33% in Q4 2016, 0.72% in Q1 2017, 0.45% in Q2 2017, -0.76% in Q3 2017, 1.45% in Q4 2017and 0.76% in Q1 2018 grew strongly in Q2 2018 by 2.05%.
Non-oil growth was driven by transportation which grew by 21.76% supported by growth in construction which grew by 7.66% and electricity which grew by 7.59%. Other non-oil sectors that drove growth in Q2 2018 include telecommunication which grew by 11.51%, water supply and sewage which grew by 11.98% and broadcasting which grew by 21.92%.
The non-oil sector performance was however constrained by Agriculture that grew by 1.3% compared to 3.00% in Q1 2018 and 3.01% in Q2 2017.
Q2 2018 GDP growth was also constrained by oil GDP with crude oil and gas production contracting by -3.95% compared to 14.77% in Q1 2018 and 3.53% in Q2 2017
Services GDP recorded its best performance in 9 quarters, growing by 2.12% in Q2 2018 compared to -0.47% in Q1 2018 and -0.85% in Q2 2017.
Other plausible factors
The decrease in the GDP growth rate in the second quarter of 2018 (which is a second consecutive decline) is a negative development for the Nigerian economy, considering the fact that it recently exited recession in the same period last year. The slum in the GDP growth rate in the second quarter of 2018 may not be totally unexpected, as the following may be adjudged as possible reasons for the fall in GDP growth rate.
Delay in the passage of the budget for a period of six months, during which the economy was almost at standstill and some companies halted their business decisions awaiting budget passage.
Decline in the importation of capital into the country by 12.53% in the period under review to $5.51 billion from $6.30 billion in the previous quarter of Q1 2018.
Increased political tensions in Q2 2018 caused some investors to pull out their investment out of the economy.