Nigerian Economy Still On the Path of Expansion
Recently, the National Bureau of Statistics (NBS) published the Gross Domestic Product (GDP) report for Q4:2023. For the thirteenth (13th) consecutive quarter since Q2:2020, the Nigerian economy grew by 3.46% YoY, an improvement from Q3:2023 (+2.54% YoY). This was spurred by growth in both the oil (+12.11% YoY in Q4:2023) and non-oil (+3.07% YoY in Q4:2023) sectors. However, in 2023FY, the economy slowed down to 2.74% YoY compared to 3.10% YoY recorded in 2022FY. The slower pace of growth in 2023FY indicates the negative impact of persistent macroeconomic issues (high inflation, high interest rate, FX illiquidity) and structural challenges (insecurity and inadequate infrastructure) on the Nigerian economy during the period.
We expect the low base effect from Q1:2023 (+2.31% YoY) induced by the Naira redesign policy to buffer growth in Q1:2024. Our optimism extends to the Oil sector, buoyed by recent government initiatives aimed at enhancing oil production, including the green light for the auction of dormant oil and gas fields deserted by International Oil Companies (IOCs) for over a decade. Additionally, the commenced operation of the Port-Harcourt and Dangote Refinery is poised to support growth in the Oil sector in 2024. Furthermore, we anticipate the Services sector to lead the non-oil space, acting as a catalyst for growth in the sector. However, we remain cautious of escalating inflationary pressures, persisting FX pressures, higher energy costs, and the looming electricity tariff hikes, all of which could potentially impede growth in the Non-oil sector. Overall, for 2024FY, we project GDP growth rates at 2.71% for the base case, 2.09% for bear case and 3.24% for the bull case.
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