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Key macroeconomic indices show Buharinomics is falling apart


This time last year, Nigeria had just exited a crushing recession that had brought on millions of job losses, reduction in government revenue, depreciating exchange rate and widespread poverty. Signs of an even stronger growth in the third quarter of the year were strong as limitations that stifled the forex market was partially lifted with investors showing renewed confidence in the economy. Oil prices were rising again and there was a truce in the Niger Delta, stopping the bombing of pipelines that had drastically reduced oil exports.

The result was a real GDP growth rate of 1.17% at the end of the third quarter of the year, confirming Nigeria’s exit from recession. When the numbers rolled in, the underlying data that supported the growth recorded in the quarter were impressive.

The economy continued to improve throughout 2017 with the real GDP growth rising to 2.11% in the last quarter of the year and ending with an annual Real GDP growth of 0.82% in 2017.  Since then, the momentum has been anything but strong.

From Recovery to Struggling 

The post-recession economic recovery achieved in the third and fourth quarters of 2017 began to decline gradually in the first quarter of 2018 when the GDP fell to 1.95% representing a quarter on quarter decline of 7.58%. Since then, the Nigerian economy has been recording macro-economic indices which show that the economy is really on a decline. 

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Recent data released by the National Bureau of Statistics (NBS) for the second quarter of 2018 show that the Nigerian economy is still very fragile and is now falling from the post-recessional economic recovery it made, especially in the third and fourth quarters of 2017. 

Key sectors posting negative growth

  • The Oil sector posted a negative Real GDP growth for the first time since Q1 2017 (when the economy was still in recession) by posting a declined growth of -3.95% in Q2 2018 from 14.77% recorded in the previous quarter of Q1 2018.
  • Considering the fact that the oil sector is the life wire of the economy and almost single-handedly brought the economy out of recession with a GDP growth of 23.03% in Q2 2017; the quarter on quarter decline of 18.72% should be a worrisome development for the economy. 
  • The manufacturing sector’s real GDP also dropped to 0.68% in the second quarter of 2018 from 3.39% recorded in Q1 2018.
  • This shows that the manufacturing sector contracted by 2.17% on a quarter on quarter basis.
  • The decline in the exports and GDP of Manufacturing and Solid Minerals sectors is an ominous sign that the federal government’s diversification efforts are not yielding the needed results.
  • Agricultural real GDP growth declined to 1.19% (lower than that of recession period) to record its lowest growth in several years, while the finance and insurance sector’s real GDP also slumped to 1.28% from 13.0% in Q1 2018.  

Other macroeconomic indices

  • Capital imported into Nigeria fell from $6.3 billion in the first quarter of 2018 to stand at $5.5 billion in Q2 2018 showing a decline of 12.53% from the previous quarter.
  • Foreign portfolio investment declined to $4.12 billion in Q2 2018 from $4.57 billion in the first quarter of 2018. 
  • Nigeria’s total export value contracted for the first time in about 10 years in Q2 2018. It declined by 4.9% from N4.70 trillion in Q1 2018 to stand at N4.46 trillion in the second quarter of 2018.
  • Solid mineral exports also fell by 25.98% quarter on quarter (N19.93 billion) from N26.92 billion in Q1 2018 while raw material exports declined by 2.98% in Q2 2018 to N31.72 billion.  
  • Manufacturing exports recorded a strong fall of 83.9% in Q2 2018 (N69.86 billion) from N434.37 million in the first quarter of 2018. 
  • Also, Nigeria’s external reserves have been on a free fall in the past few months. Having risen to a year high of $47.8 billion towards the end of June 2018, it has failed to hit the $48 billion mark since and instead dropped below $47 billion for the first time in 4 months, on August 6, 2018. It has been dropping since then and currently stands at $45.47 billion as at September 6, 2018. 

Why it matters? 

  • The decrease in the inflow of Capital Imports into Nigeria, especially Portfolio Investment, is typically a negative development for the Nigerian Capital Market.  
  • The decrease in exports means a reduction in the foreign exchange revenue for Nigeria. Moreover, If the drop in export revenue persists in this third quarter of 2018, Nigeria may find it difficult executing part of the 2018 budget in Q3 and Q4 2018, since the budget is premised on an expected revenue of N7.2 trillion. 
  • The Nigerian stock market has also recorded a string of losses in the last quarter, with low foreign investor participation seen as one of the reasons why. 
  • Stocks have lost a whopping N3 trillion year to date and about N1 trillion this quarter alone (with one month to go).
  • Nigeria’s vile political climate is also a possible factor that could be a deterrent to future foreign investor inflow in the market. 

What next

  • The Buhari Government will hope that the economy turns into positive territory as campaing begind in earnest towards the end of the year.
  • Unfortunately, the recent spate of corporate raids by the Attorney General of the Federation and other agencies of government is threatening to jeopardize foreign investments into the country.
  • As investors watch the continuous plummeting in the stock markets all eyes will shift to corporate profits and how they perform at the end of the third quarter of the year.
  • The emerging market turmoil currently spreading globally has sucked out foreign portfolio inflows into the country. Investments are also likely to be scaled back as businesses wait on the sidelines to see how politicians are going to shape the elections.
  • This all point to a very fragile economic growth for 2018.


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