Economy held back by sluggish non-oil sector
* Central bank has forecast 3% growth for 2019 (Adds analysts, detail)
Nigeria’s economy grew by 1.94 per cent in the second quarter of the year compared to 2.10 per cent growth in the first quarter. The second quarter in a row of decline as the country struggles to shake off the effects of a recession it escaped two years ago.
Nigeria’s economy, the largest in Africa, grew by 2.10% in the first quarter compared with the previous year, the statistics office said on Tuesday.
The economy has been held back by sluggish performance in the non-oil sector, despite government efforts to improve those industries and wean Nigeria off the crude oil on which it depends. The central bank has forecast growth of 3% for 2019.
John Ashbourne, Senior Emerging Markets Economist at Capital Economics in London, said in a note that the GDP figures “underlined the weakness of Nigeria’s economy” and suggested that growth would remain at around 2% in 2019 and 2020.
In the second quarter, the non-oil sector grew 1.64% and the oil sector expanded 5.15%, according to the statistics office. But crude production in the continent’s top oil producing country dipped to 1.98 million barrels per day from 1.99 million in the previous quarter.
“The recovery in oil GDP looks promising. However given softer oil prices in subsequent quarters, this pace of growth… may not be sustained,” said Razia Khan, chief economist for Africa and Middle East at Standard Chartered Bank.
“Weak growth itself should not have been too much of a surprise,” she added, arguing that “Q2 represented something of a lost, post-election quarter”.
She pointed to the uncertainty around the government in the wake of President Muhammadu Buhari’s re-election in February. Buhari was not inaugurated until May 29 and did not appoint ministers until August.
Nigeria’s stock market has been beset by lacklustre performance this year as investors waited for policy signals in the wake of the election.
Local banks have been trading at historic low book values, weighed down by weak sentiment over the economy.
Also on Tuesday, South Africa reported stronger-than-expected 3.1% growth as mining and manufacturing recovered.
Nigeria and South Africa – the continent’s two largest economies – have a major impact on regional growth. The two, when combined with Angola, make up about 60 percent of sub-Saharan Africa’s annual economic output.
In April, the World Bank cut its growth forecast for sub-Saharan African growth to 2.8 percent, from an initial 3.3 percent, in part due to slower growth in Nigeria and Angola, due to challenges in the oil sector, and subdued investment growth in South Africa.