BY BAMIDELE FAMOOFO
Financial experts have said they expect that Nigeria’s economy will sustain the growth it recorded in the 2021 financial year as Gross Domestic Product closed the year at 3.4%.
Abulazeez Kuranga, lead Analyst at Cordros Capital Limited explained that the growth recorded in the fourth quarter (Q4) in 2021, reflects that the economy has recouped all pandemic losses.
“The sustained growth momentum, albeit lower compared to Q3-21, was primarily driven by the non-oil sector, reflecting gains associated with the (1) seasonality effect in agriculture, (2) sustained normalisation of economic activities, and (3) improved credit to the private sector,” he said.
Specifically, Kuranga’s attribution analysis showed that the positive contribution of the non-oil sector (+4.46%) to the total GDP growth offset the negative contribution from the oil sector (-0.47%). “Given the better-than-expected outturn in Q4-21, we have revised our estimates for Q1-22 and 2022FY growth upwards to 2.81% y/y and 2.92% y/y, respectively.”
According to the recently released GDP report by the National Bureau of Statistics (NBS), the domestic economy grew by 3.98% year-on-year (y/y) in Q4-21 compared with 4.03% in the third quarter. The Q4-21 tally brought the full-year growth print to 3.40% (2020FY: -1.92% y/y.
In 2021FY, the oil sector’s performance reflected the troika impact of low investments, infrastructure decay, and COVID-19 induced complexities. According to the Nigerian National Petroleum Corporation (NNPC), Nigeria’s crude oil output losses amounted to 57.38mb in 11 months in the year 2021 (or an average of 171.81kb/d during the same period) – Forcados, Bonny and Qua Iboe terminals were the most affected during the period. In Q4-21, crude oil production (excluding condensates) settled at 1.34mb/d (Q3-21: 1.35mb/d) – the lowest since 2001 when the OPEC started keeping crude oil production records for its members. If we include condensates, crude oil production settled at 1.50mb/d in Q4-21, cascading to a decline of 8.06% y/y in the Oil GDP. Overall, crude oil production (including condensates) averaged 1.60mb/d in 2021FY (2020FY: 1.78mb/d).
Meanwhile, the non-oil sector remains the predominant driver of the growth in the broad economy. Specifically, the sector grew by 4.73% y/y in Q4-21, albeit slower than the growth recorded in Q3-21 (5.44% y/y) due to the fading impact of the low base from the prior year.
Decomposing the GDP by sectors, “we highlight that Industries (-0.05% y/y vs Q3-21: -1.63% y/y) recorded its third consecutive quarter of decline given the persistent contraction in crude oil production and refining,” Cordros said.
On the other hand, Agriculture contributed 3.58% to GDP y/y while Services recorded 5.58%; y/y. Both sectors posted stronger growth in the review period. At the same time, the Industries sector sustained its decline, contracting by 0.47% compared to -5.85% in 2020.
