Leading economic and financial sector analysts have predicted a stronger outing for the Nigerian economy in the last quarter of the year, premising their forecast on stronger crude oil production from where Nigeria is expected to make exchange rate revaluation gains, as well as sustained growth in the services sector, most especially in the telecommunications and financial services sub-sectors.
The prediction follows the higher real GDP growth rate recorded by the Nigerian economy at the end of the third quarter ended September 2023.
“The outlook is that Nigerian growth in Q4 will be stronger than Q3. The IMF and World Bank are estimating full-year 2023 growth of 2.9%, implying that the economy will have to expand by 4.24% in Q4,” Lagos-based Financial Derivatives Company (FDC) said in a note to investors.
“The policy-making environment is more likely to be predictable and stable, especially in exchange rate management and curtailment of the petrol and electricity subsidies in the near term,” FDC said.
According to the latest macroeconomic data from the nation’s data agency, the National Bureau of Statistics (NBS), the Nigerian economy grew in real terms by 2.54 per cent at the end of the third quarter of 2023. This was higher than the 2.31 per cent and 2.51 per cent real growth rates recorded at the end of the first and second quarters of 2023, respectively.
On a year-on-year basis, the economy posted a stronger growth rate than the 2.25 per cent recorded at the end of the third quarter of 2022.
“Gross Domestic Product (GDP) grew by 2.54% (year-on-year) in real terms in the third quarter of 2023. This growth rate is higher than the 2.25% recorded in the third quarter of 2022 and higher than the second quarter 2023 growth of 2.51%,” NBS stated last week.
Core sectors such as agriculture have continued to produce oscillating growth rates in real terms. From a negative growth rate of 0.9 per cent at the end of the first quarter of 2023 to 1.50 per cent during the second quarter, economic activities in the nation’s agriculture sector moderated at the end of the third quarter of 2023, as real GDP growth rate moderated to 1.30 per cent. This brings the average real GDP growth rate in the agriculture sector to 0.63 per cent in 2023 as against 1.90 per cent in the comparable quarters in 2022.
Crop production grew by 1.35 per cent while livestock recorded 1.18 per cent real growth rate. Forestry sub-sector outperformed other sub-sectors in agriculture as it grew by 2.21 per cent at the end of the third quarter. However, the fishing sub-sector witnessed lower productivity as its Q3 2023 real GDP growth rate fell by 2.33 per cent.
Manufacturing sub-sector continues to wobble, following an unimpressive growth rate of 0.48 per cent at the end of the third quarter. When analysed individually, the clog in the wheel of this sector is oil refining whose sub-sectoral GDP fell by 37.01 per cent.
It should be noted that the oil refining sub-sector was in a recession throughout 2022 just as the trend continues to worsen in 2023.
Chemical and pharmaceutical products sub-sector within the nation’s manufacturing sector showed its resilience as it grew by 6.77 per cent at the end of the third quarter of this year. Other sub-sectors that grew in real terms with the manufacturing sub-sectors include cement, 4.20 per cent; electrical and electronics, 2.79 per cent; wood and wood products, 2.27 per cent; non-metallic products, 2.22 per cent, and food, beverage and tobacco, 0.92 per cent.
Although the overall growth rate in the mining and quarrying sector was negative at 1.96 per cent, metal ores and coal mining were exceptional during the third quarter. Metal ores sub-sector grew by 69.76 per cent, followed by coal mining which grew by 58.03 per cent.
The financial services sector sustained its growth momentum as it produced a real growth of 28.21 per cent at the end of the third quarter. This growth was mainly driven by financial institutions whose sub-sectoral real growth was 29.66 per cent, and followed by insurance that grew by 15.21 per cent.
Growth in the telecommunications sub-sector moderated to 7.74 per cent at the end of the third quarter, as against 9.74 per cent in Q2 2023, as well as 10.06 per cent in Q3 2022.
Industries contributed 18 per cent to the GDP while services contributed 52.70 per cent.
In all, 22 sectors expanded, 12 slowed while 12 contracted, according to FDC.
“Manufacturing, Trade, and Construction (contribution to real GDP: 8.4%, 15.2%, and 3.4%) grew 0.5%, 1.5%, and 3.9% respectively, indicating the challenging operating environment as businesses cope with sharp FX depreciation, rising energy cost, and weakening consumer purchasing power,” analysts at Afrinvest said in a note to investors, adding that crude oil production at 1.8 million barrels per day will be beneficial to the country.
“Regarding the Service sector, we anticipate its contribution to real GDP to maintain growth, particularly with robust support from the Telecommunications and Financial Services sub-sectors. Similarly, an optimistic performance is expected from the Transport & Storage and Trade sub-sectors in Q4:2023, driven by seasonal business activities during the festive periods,” Afrinvest said.
