Despite move to diversify, oil sector dominates with 6.33% contribution to economic growth

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BY BAMIDELE FAMOOFO

Uba Group

Efforts by the Central Bank of Nigeria to help diversify the revenue base of Africa’s biggest economy is gradually yielding fruits, but the oil economy still remains the mainstay of the nation as at the end of second quarter in 2022.

Aggregately, the oil sector contributed 6.33 percent to the total real GDP in Q2 2022, down from the figures recorded in the corresponding period of 2021 and the preceding quarter, where it contributed 7.42 percent and 6.63 percent respectively.

The oil sector’s real growth grew 14.27 percent points (-11.77% y/y) during the quarter, signaling an increase from -26.04 percent in Q1 2022 and 0.89 percent points relative to the rate recorded in Q2 2021.

The non-oil sector, on the flipside, recorded a growth of 4.77 percent in real terms.

Though the growth was lower by 1.97 percent points relative to Q2 2021 and 1.31 percent points lower than the first quarter of 2022, key sectors such as Information and Communication; Trade; Financial and Insurance; Transportation; Agriculture, and Manufacturing accounted for positive output growth.

In real terms, the non-oil sector contributed 93.67 percent to the nation’s GDP in the second quarter of 2022, higher than the share recorded in the second quarter of 2021 which was 92.58 percent, and higher than the first quarter of 2022 recorded as 93.37 percent.

According to data released by the NBS, Nigeria’s Q2 GDP numbers grew by 3.54 percent in real terms in Q2 2022 to N17.29 trillion, rising 0.44 percent points from 3.1 percent in Q1 2022 with growth driven by the non-oil sector.

This shows a decline of 1.47 percent points from 5.01 percent in the corresponding period of 2021 when Nigeria recorded rapid growth following the impact of the COVID-19 pandemic.

The growth reflects the retarded economic activity during the quarter than was witnessed in the first quarter and was largely impacted by the recent increases in fuel, food, and other commodities during the period. In addition, power shortages, infrastructure challenges and insecurity, limited investment inflows, and business expansion further damped Nigeria’s growth prospects, further heightened by inflationary pressure in 2022.

Now, Nigeria is not reaping from higher oil prices owing to high subsidy payments and lower crude oil production, which threaten government revenue and raise the need to borrow.

Consequently, the NBS report revealed that Nigeria in Q2 2022 recorded an average daily oil production of 1.43 million barrels per day, lower than the daily average production of 1.61mbpd recorded in the same quarter of 2021 by 0.18 mbpd and lower than the first quarter 2022 production volume of 1.49 mbpd by 0.06mbpd.

Given the decline in oil output in the second quarter of 2022 according to OPEC sources, the growth of the oil sector was negative mainly due to oil theft and limited investments in the oil and gas sector.

From its analysis of the NBS data, Cowry believes that while the 3.54 percent year-on-year output growth rate is encouraging, the need for Nigeria to grow at a considerably greater pace of at least 5 percent to 6 percent is sacrosanct to achieve more inclusive growth and get closer to its growth potential.

“On the other hand, we opine that the soaring inflation, particularly in view of commodity price shocks and imported food inflation due to the Russian -Ukraine conflict, pending subsidy payments by the government, and tumbling daily oil production volumes may pose as a downside risk to growth this year,” Cowry said.

Meanwhile, brewers have made lots of fortune as Nigerians drank beer worth N599.11 billion in six months running from January to June 2022.
This is according to the first quarter results of four major brewers in the country.

Champion Brew ended the First Half (H1) 2022 as the best performing company in the brewery industry, as Nigerian Breweries and Guinness Nigeria lost market share to their rivals.

In the industry analysis of their revenue growth from January to June 2022, Nigerian Breweries, Guinness Nigeria, International Breweries and Champion Brew generated a combined N599.11 billion.

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The turnover grossed by the four largest brewers in the country grew 31.2%, when compared to the N456.44 billion they generated during the corresponding period in 2021.

While the net profit recorded by Nigerian Breweries, Guinness Nigeria, International Breweries, and Champion Brew increased by 54.1%, as it rose to N36.14 billion in H1 this year, in contrast to the N23.44 billion reported in H1 2021.

The performance review is listed from least to best performing
Guinness Nigeria was the least performing company in terms of revenue growth, with the company reporting 28.9% in turnover growth, which rose to N206.82 billion in H1 this year, from N160.41 billion in H1 2021.

However, Guinness Nigeria recorded the highest growth in profit after tax, as it closed the first half of this year with N15.65 billion, which is 1146.7% year-on-year growth, when compared to the N1.25 billion of H1 2021.

Despite growing its revenue to N274.03 billion between January and June this year, the 30.9% growth rate when compared to the N209.21 billion turnover of H1 last year, makes Nigerian Breweries the third best performing firm in the market.

The management was also able to grow its net profit by 142.8% year-on-year, having reported that it made N19.08 billion in the first six months of 2022, surpassing the N11.22 billion profit after tax of H1 2021.

From sales of its products, International Breweries generated N111.40 billion within six months of H1 this year, in contrast to the N81.96 billion grossed in the same period last year – a difference of 35.9%.

However, its revenue growth couldn’t prevent International Breweries net profit from a -97.5% decline, after failing to surpass the N13.88 billion profit after tax of H1 2021, as the firm reported N336.20 million net profit in the first half of this year.

While Champion Brew holds a small share of the market, the company recorded the highest revenue growth of 41.6% during the period under review, making it the best performing firm in the industry. It generated N6.86 billion, against the N4.84 billion reported in H1 2021.

The brewer also joined Nigerian Breweries and Guinness to grow its profit after tax, reporting a 141.6% growth year-on-year, as its net profit rose to N1.07 billion in H1 2022, surpassing the N445.23 billion recorded during the same period last year.