Exactly one year since Nigeria recovered from the economic recession, National Bureau of Statistics (NBS) this morning announced that the country recorded national output growth of 1.50 percent in the second quarter (Q2) of the year, marking the second consecutive quarter of a decline in the pace of economic growth in Nigeria.
The output growth in Q2 fell below the 1.95 percent economic growth recorded in Q1 as analysts say the 6-month delay in the passage of the national budget was a key reason why economic growth remained under 2 percent for the second consecutive quarter since Q4 2017.
“The second quarter of this year was quite tumultuous for the national economy. Several economic headwinds kept economic growth at bay. On the fiscal side, delay in the passage of the budget along with increased political tensions hurt business confidence and caused companies to delay their own business decisions.
The monetary policymakers provided no stimulus, choosing to hold interest rates at 14 percent in an economy badly needing a catalyst to jumpstart growth,” said Faith Ogedengbe, research analyst, GDL Asset Management.
Nigeria’s economic growth of 1.50 percent in Q2 is well below the 2018 economic forecast of International Monetary Fund (IMF) and Nigerian government that the Nigerian economy will grow at 2.1 percent and 3.5 percent respectively.
It is not unlikely that the output growth projection for Nigeria in 2018 will now be revised considering past quarter results and the expected slowdown in investments in the country as the general elections draw closer. Although analysts expect that budget spending and campaign spending may help lift economic growth in the second half of the year.
The oil sector which was largely responsible for the economic recovery in the last four quarters was unable to push the economy beyond the 2 percent barrier in Q2 despite a price rally that saw crude oil prices climb 13 percent during the second quarter.
The non oil sector continued to deliver lackluster growth performance as the nonoil sector expanded by only 1.3 percent despite stable exchange rate price and decent foreign exchange supply.
Consumer confidence was low in Q2 according to CBN consumer expectations survey and the purchasing manager’s index was flattish for the three months in the second quarter of the year which makes the weak economic growth quite expected.
Investors may have already priced the poor economic performance into the stocks already as the Nigerian Stock Exchange All Share Index declined by around 7.3 percent in Q2 which may ease concerns of further selloffs in the equity market based on the weak GDP figures.
With Nigeria’s economic growth still under the population growth rate of around 2.61 percent, the economic health of the country continues to worsen.
Nevertheless, economists will take it as a positive that in a difficult second quarter, Nigeria’s economic growth did not backslide into negative territory.