Nigeria expects 2.28 percent economic growth on rising oil output, manufacturing expansion

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Nigeria’s economy will grow at a faster pace in the fourth quarter of 2019, more than the real growth of 2.28 percent recorded in Q3, Insider analysis of data shows.

The growth forecast is ahead of an official release of Q4 GDP figure by the Abuja-based National Bureau of Statistics, scheduled for early hours on Monday.

The increase growth in gross domestic product in the quarter, would be fueled by an increased level in the volume of oil production as well as an expansion in the purchasing managers index (PMI), which serves as a forward indicator of economic activities

Oil production, including condensates and natural gas liquids in the fourth quarter of 2019, stood at an average of 1.92 mbd, according to Central Bank’s data.

This was 0.5 percent higher, when compared with the 1.91 mbd produced in the quarter, driven by reduced incidences of pipeline vandalism and restiveness in the oil producing areas.

Developments in the oil sector has been a major determinant of the direction of economic activities in Africa’s largest economy which depends largely on the sector to rake in about 70 percent of its revenue and 85 percent of its foreign exchange earnings.

When oil production slid to as low as $1.2 million barrel in 2016 due to the intense agitation of the Nige Delta region, economic activities in the African giant state was almost brought to halt.

The culminated effect of the low oil production level followed with a 5-quarter of negative growth (lengthy recession).

And it was not until Nigeria began to witness some relapse in the oil producing region that growth began to pick up, signposting the positive correlation between oil production and growth of economic activities.

Even though movement in commodity prices are not factored in the calculation of economic activities since the GDP is deflated using a base year period (2010 prices), higher crude oil prices to a large extent, have a way of indirectly triggering the activities of various sectors including manufacturing, transportation and telecommunication, which are some of the major sectors of the economy.

CBN data shows that average spot price of Nigeria’s reference crude oil, the Bonny light, was higher at $64.87 barrel in the fourth quarter of 2019, compared to $64.25 barrel in the previous quarter, driven by optimism of a phase one trade agreement between the U.S. and China, as well as the improved outlook for global oil demand amid better-than-expected economic performance of some major economies in the review period.

Similarly, the PMI, which is based on survey responses showing changes in the level of business activities from purchasing and supply executives of manufacturing and non-manufacturing organizations in all 36 states in Nigeria and the Federal Capital Territory (FCT), expanded in the quarter.

The expansion in the PMI which stood at an average of 59.78 points was much faster when compared to the 58.11 points scored in Q3 hence, indicating an increase in the level of business activities.

An expansion in the real growth is paramount for Africa’s biggest oil producer who has seen real growth at 2 percent below the rate of its population.

The slower than needed growth has made more and more of its citizen’s poor, and has further widened its inequality gap.

Charles Robertson, Global Chief economist at investment firm, Renaissance Capital, said the economy would need to grow as much as 7 percent to enable its drive inclusive growth and lift a well over 90 million of its citizens living below the poverty trap.

To achieve this, the country would have to diversify its economy from the dependent on the oil sector and carry out strategic reforms particularly in the education and health sector, Robertson said

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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