Article summary
- KPMG Nigeria has said it expects Nigeria’s Q1 real GDP growth to be between 1.5% and 2.0% if the oil sector makes a recovery.
- If the oil sector contracts further, KPMG expects real GDP growth to be between –0.23% to –1.18%.
- Since 2022, Nigeria’s oil sector has struggled due to crude oil theft, which has also impacted investments in the sector.
Analysts at KPMG Nigeria have said that if Nigeria’s oil sector does not make a recovery, Nigeria’s gross domestic product growth could be between –0.23% to –1.18%. The advisory firm stated this in a macroeconomic analysis released on Wednesday, May 3.
In the report, KPMG Nigeria stated that a review of Q1 2023 results from companies like Dangote Cement, MTN, GlaxoSmithKline and ABC Transport revealed slower growth in earnings or year-on-year losses.
According to KPMG Nigeria, these losses were because of factors affecting both the demand and supply side of business operations. Some of these factors include higher energy costs, cash shortages following the Naira redesign policy, higher taxes and transportation as well as distribution costs.
The Nigerian oil sector context
Since 2022, Nigeria’s oil sector has experienced a major challenge in its production capacity as oil theft resulted in reduced production output.
Recall that Nairametrics reported in September 2022, that Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company (NNPC) Limited said that Nigeria was losing 95% of oil output to criminals at the oil hub at Bonny, and the country could only secure 3,000 barrels out of 239,000 barrels injected into the pipeline from Bonny Terminal. Also, low investments in recent years have also contributed to the glut experienced in the country’s oil sector.
However, if Nigeria’s oil sector should make a recovery, KPMG Nigeria expects a real GDP growth of between 1.5% and 2.0%.
A part of the KPMG Nigeria report stated
Given our expectation of slower consumer demand and hence, reduced earnings for businesses and at the same time, rising costs of their operations, we are maintaining our earlier estimate of a N10-15 trillion drop in nominal GDP and a Q1 real GDP growth of between 1.5%-2.0% on the assumption that the oil sector can reverse its 11-quarter long contraction. Further contraction from the oil sector may result in Q1 2023 real GDP growth of -0.23%-1.18%.”
What you should know: A policy brief on crude oil theft and data from the Nigerian Extractives Industry Transparency Initiative (NEITI) showed that between 2009 and 2020 (a 12-year period), Nigeria lost 619.7 million barrels of crude oil valued at $46.16 billion or N16.25 trillion. The volume of crude oil losses represents a loss of more than 140 thousand barrels per day.
