Nigeria’s real Gross Domestic Product grew year-on-year (y-o-y) by 1.94% to N16.90 trillion in Q2 2019, but slower than 2.01% growth registered in Q1 2019.
The Oil & Gas sector which chiefly accounted for the improved GDP number grew y-o-y by 5.15% to N1.49 trillion in Q2 2019 (a reversal from the negative 3.95% decline in Q2 2018).
This was chiefly due to the increase in crude oil production in the quarter under review. Quarterly average crude oil output rose to 1.87 million barrels per day (bpd) in Q2 2019 from 1.66 million bpd in Q2 2018.
Also, average crude oil price (bonny light) rose by 8.16% to USD69.87 per barrel in Q2 2019 from USD64.60 per barrel in Q2 2018.
Similarly, the non-oil sector grew y-o-y by 1.64% to N15.41 trillion; although at a slower pace compared to 2.05% in Q2 2018.
This was chiefly due to the 11.34% output growth seen in telecoms space to N1.92trillion (of which telecoms share of GDP constituted 11.39%).
In addition, the Agricultural and Construction sectors revved, but at a slower pace, by 1.79% and 0.67% respectively to N3.86 trillion and N0.75 trillion respectively in Q2 2019 from the N3.79 trillion and N0.74 trillion printed in Q2 2018.
On a quarterly basis, the 2.94% rise in economic growth was on the back of the 3.30% increase in non-oil sector, despite the marginal negative growth of 0.60% printed in oil & gas sector in the quarter under review.
In another development, recently released report by the Nigerian Stock Exchange (NSE) on domestic and foreign portfolio participation in equities trading for the month of July 2019 showed that equities market transactions significantly reduced when compared with the equities trades done in June 2019.
Transactions of the retail, domestic institutional and the foreign portfolio investors (FPIs) moderated as all categories of investors chose to invest in fixed income securities as at July 2019, the decision which led to the northward movement of the bonds and treasury bills prices.
Specifically, total transactions on the nation’s bourse plunged to N113.47 billion in July 2019 (from N297.25 billion in June 2019); of which FPI transactions fell to N57.78 billion (from N96.74 billion) while total domestic transactions reduced to N55.69 billion (from N200.51 billion).
Breakdown of the FPI transactions in July 2019 showed that foreign portflio outflows fell by 78.37% to N29.40 billion, while the foreign portfolio inflows moderated by 56.10% to N28.38 billion.
Also, domestic institutional transactions declined by 50.02% to N30.25 billion in July 2019 from N45.38 billion printed in June 2019.
Retail investors, who felt dissapointed with the performance of the equities market in June 2019, shunned the equities market in July as transactions from this group nosedived by 509.75% to N25.44 billion from N155.12 billion.
Hence, the NSE All Share Index (ASI) plunged by 8.11% to 27,718.27 index points in July 31, 2019 (from 29,966.87 index points in June 2019).
Consequently, most of the sectored guages plummeted in the month of July: the Banking, Insurance, Consumer Goods, Oil & Gas and Industrial indicies nosedived by 9.19%, 6.47%, 11.85%, 10.80%, and 1.30% respectively to 333.14 points, 115.74 points, 548.59 points, 225.88 points and 1,073.70 points respectively.
The slower improvement in the all-important non-oil sector indicates that the fiscal authority still needs to rejig its policies as current efforts seem ineffectual – given that the sluggish rise in output over the past few years is not justified by the quantum of annual fiscal spending.
The declines in July transactions and performance of the equities market further signposts negative economic outlook for the remainder of 2019.
Nevertheless, we note that the moderated share prices continue to present good entry points for value investors, although we expect the current bearish trend to persist even into the last quarter of 2019 as there is no stimulus in sight.
Hence, we expect the authorities to implement market-friendly policies in order to facilitate real sector productivity.