Nigeria’s economy meets World Bank growth target despite declining oil revenue


Nigeria’s economy is on a growth trajectory despite declining revenue from oil, as real gross domestic product printed 3.1 percent growth in fiscal year 2022. The growth was in tandem with projections by the World Bank and International Monetary Fund for the period. The growth however exceeded the expectations of financial and research companies like Bloomberg, Cowry Assets Management and Cordros who have predicted a slower growth. Growth projection for 2023 is mixed as first quarter output is expected to be low. BAMIDELE FAMOOFO reports

Uba Group

Contrary to the expectations of financial experts and analysts, the economy of Africa’s most populous nation surpassed its growth target in the fourth quarter of 2022, according to figures released by the National Bureau of Statistics last week.

NBS showed that GDP grew 3.52 percent to N21.04 trillion in Q4 ’22, slightly weaker than the 3.98 percent delivered in the corresponding period of 2021 and higher by 1.27 percentage points from the 2.25 percent in the third quarter. This brings the overall growth level down to 3.1 percent from the 3.4 percent delivered in 2021.

Reacting to the figures, Johnson Chukwu, Group Managing Director/ CEO, Cowry Assets Management Limited, said: “Our expectation was for a more modest full-year growth of 2.9 percent, but the outperformance relative to our forecast was mainly because of a robust growth of 5.69 percent in the services sector, which contributed 56.27 percent to the aggregate GDP.”

Abdulazeez Kuranga, lead Analyst, Cordros Research Limited, noted: “The domestic economy surprised positively, growing by 3.52 percent year on year in the fourth quarter of 2022 compared to 2.25 percent growth recorded in the third quarter of 2022.

The outturn outperformed Cordros’ (+2.72% y/y) and Bloomberg’s (+2.50% y/y) consensus estimates, with the deviation stemming from a better-than-expected growth outcome in the non-oil sector.” The World Bank was however precise in its growth projection for Africa’s largest economy which it cut from 3.8 percent earlier in the review year to 3.1 percent.

The International Monetary Fund in its own projection hinted that Nigeria’s economy will grow by 3.0 percent in 2022. There is a mixed projection for the Nigerian economy in 2023. While the IMF said the economy will beat the 2022 record, albeit marginally, the World Bank projected a lower growth.


Nigeria’s economy is set to grow from 3.0 per cent in 2022 to 3.2 per cent in 2023 due to measures made to address insecurity in the oil sector, according to the International Monetary Fund. The IMF disclosed this in its World Economic Outlook Update (January 2023) report on January 31, 2023.

Nigeria’s economic growth is projected to decelerate to 2.9 per cent in 2023 and remain at that pace in 2024, the World Bank has said.


In line with analysts’ expectations, the oil sector’s contraction moderated to 13.38 percent y/y in Q4-22 (Q3-22: -22.67% y/y). The moderate contraction, according to financial pundits, reflects higher crude oil production (albeit significantly below the country’s OPEC+ quota; 1.83mb/d), reflective of the government’s efforts at tackling crude oil theft and vandalism in the review period.

Notably, crude oil production settled higher at an average of 1.34mb/d in the review period (Q3- 22: 1.20mb/d). A breakdown of the data provided by the Nigerian Upstream Regulatory Commission showed that the Bonny, Forcados, Brass and Escravos terminals primarily contributed to the increased crude oil production in Q4-22 relative to Q3-22. Overall, crude oil production (including condensates) averaged 1.37mb/d in 2022 fiscal year, dropping by -14.7 percent y/y as against 2021FY: 1.60mb/d) on account of the synchronous impacts of (1) massive oil theft and pipeline vandalism, (2) retrenchment of large International Oil Companies (IOCs) from onshore oil exploration, and (3) lagging impacts of decrepit infrastructure.

Further out, the non-oil sector grew stronger in Q4-22, increasing by 4.44 percent y/y relative to +4.27 percent y/y in Q3-22. Analysing the outturn, increases across the Services sector which recorded a growth of 5.60 percent as against 7.01 percent in Q3-22, y/y and Agriculture sector, 2.5 percent in Q4 as against 1.34 percent in Q3, 2022; neutered the contraction in the Industries (-0.94% y/y vs Q3-22: -8.00% y/y) sector, and supported the growth. It was noted that the persistent decline in the Industries sector is consistent with the country’s lingering challenges surrounding crude oil production and refining.

For 2022FY, it was highlighted that the Services sector grew by 6.66% (2021FY: +5.61%), while the Agriculture sector grew slower by 1.88% (2021FY: +2.13%). Meanwhile, the Industries sector declined at a faster pace; it contracted by 4.62% (2021FY: -0.47%).


Services: Based on Cordros analysis, the Services sector’s growth was primarily inspired by the Information & Communication (10.35% y/y vs Q3-22: 10.53% y/y), Trade (4.54% y/y vs Q3-22: 5.08 percent y/y), and Finance & Insurance (11.61% y/y vs Q3-22: 12.70% y/y) sub-sectors.

Commenting on the contribution of ICT to the growth of the Service sector, another analyst from Cordros Research, Tesleemah Lateef, noted: “The growth in the ICT sub-sector did not come as a surprise given the sturdy growth in the Telecommunications industry amid (1) increased data traffic, (2) higher gross connections, and (3) recovery from the NIN-SIM linkage directive, as telco companies reactivated more customers in the review period.”

Using MTNN as a proxy, she said the telco’s data traffic grew by 66.6 percent y/y amid a 10.5 percent growth in mobile subscribers in 2022FY.


On the growth in the Trade subsector, Cordros believed the electioneering-induced trading activities supported the performance in the review period.

Finally, the performance in the Finance & Insurance sector can be attributed to the increased lending activities by commercial banks as credit to the private sector rose by 18.8 percent y/y as of December 2022.

Agriculture: Although Agriculture GDP stood at +2.05% y/y as against +1.34 percent in Q3, growth was higher than the prior quarter.

Experts highlight that the growth slowed significantly compared to the fourth quarter of the preceding two years, attributing the poor outturn to the impact of the high flooding incidence witnessed across the country during the primary harvest season.

“Indeed, crop production (91.1% of Agric GDP) increased by 2.41 percent y/y in Q4-22 (Q4 average between 2017 and 2021: 3.43% y/y). Overall, the Agriculture sector grew by 1.88% y/y in 2022FY (2021FY: +2.13% y/y) – its first sub2.0% growth and the lowest annual growth rate since the NBS started keeping the current data series.

Manufacturing: The Manufacturing sector returned to growth after its contraction in Q3-22. Precisely, the sector grew by 2.83% y/y in Q4-22 relative to the contraction recorded in Q3-22 (-1.91% y/y) despite the lingering production constraints hampering the general production level. Nonetheless, we highlight that the Food, Beverage & Tobacco sub-sector under Manufacturing grew by 4.94% y/y (Q3-22: -4.05% y/y), likely due to the increased food production associated with the festive-induced demand in the review period. Aside from that, Oil refining (-39.23% y/y vs Q3-22: -44.70% y/y) maintained its stretch of underwhelming performance as the country’s major oil refineries remained inoperative.

That said, the Construction (3.80% y/y vs Q3-22: 5.52% y/y) subsector continues to reflect the sustained growth in the Cement (3.89% y/y vs Q3- 22: 4.13% y/y) sub-sector.


Q1-23 Oil GDP: It is expected that crude oil production will maintain its slight increases over the short term in line with the government’s recent efforts at curbing crude oil theft and vandalism. Indeed, data from the NUPRC shows that aggregate crude oil production (including condensates) increased by 5.7 percent m/m to 1.49mb/d in January (December 2022: 1.41mb/d).

“Thus, we expect crude oil production, including condensates, to average 1.50mb/d in Q1-23, translating to an optimistic growth estimate of 0.67% y/y. However, we believe that for Nigeria to achieve crude oil production up to the country’s OPEC+ production quota (1.83mb/d), the government will need to incentivise investment in new production capacity and invest in the proper training of indigenous firms to handle the divested IOC’s assets,” Cordros hinted.

Non-Oil GDP: Aside from the pre-existing challenges, analysts expect the non-oil sector’s growth to moderate significantly in Q1-23 because of how the current demonetisation drive is disrupting economic activities, particularly in the services and manufacturing sectors. Election uncertainties are also expected to constrain activities in the non-oil sector. Hence, we project the non-oil sector will grow by 1.98 percent y/y. Agriculture: It is expected that the increased security challenges associated with the build-up to the general elections will constrain farming activities, limiting agricultural output. “Similarly, we expect the lower fertiliser usage arising from the lingering high prices to constrain farm activities, limiting crop production.

Therefore, we estimate that the Agriculture sector will grow by 1.88 percent y/y in Q1-23.” Services: Domestic trade activities continue to witness intermittent disruptions in line with the (1) policy maker’s back and forth on the deadlines for old high denomination notes to cease being legal tenders and (2) cash crunch given the significantly low supply of new naira notes. More disturbing is the low-ticket transactions ‘ distrust of digital payments, slowing down their sales, more so that many buyers are experiencing cash shortages to pay for goods and services.

Similarly, the people are now rejecting the old N1000.00, and N500.00 notes as a means of exchange after President Buhari’s address on February 16. We understand that the N1, 000 and N500 notes constitute 54.0 percent and 28.0 percent of currency in circulation as of December 2022.

This is not surprising, given the country’s high inflationary environment. “Consequently, unless there has been a drastic change in the composition of N1,000 and N500 notes since December 2022 (which is unlikely in our view), we expect trading activities to be significantly hampered in the near term, more so that the supply of new notes remains low. Thus, we project the Trading sub-sector’s growth to moderate considerably to 1.21% y/y, weighing down the service sector.

Away from Trade, we expect the ICT sub-sector to maintain its solid growth pace because of the continued strong voice and data traffic growth. “However, the ICT’s growth is likely to moderate compared to the prior quarter, given the high base effects from the prior year’s corresponding period.

Elsewhere, while the relatively improved macroeconomic environment would spur banks to maintain the current quantum of risk assets, the financial institution’s growth will likely moderate given the combined impact of (1) tighter monetary conditions, which are likely to limit the growth of credit creation and (2) unfavourable base effects from the prior year. Therefore, on a balance of factors, we expect the Service sector to grow by 2.68% y/y.” Manufacturing: “Aside from the high production costs exacerbated by (1) high energy prices, (2) elevated borrowing costs and (3) FX constraints, we expect the lingering cash crunch to also negatively impact the Manufacturing sector.

We understand that producers are now producing below capacity, given the low consumer spending associated with cash shortages and the cessation of N1000 and NGN500 as legal tenders. In addition, heightened uncertainties regarding the election outcome are also expected to limit production in Q1-23.”