CardinalStone Research - Macroeconomic Note - Q4'14 GDP Review

NIGERIA | MACRO-ECONOMIC NOTE

Q414 GROSS DOMESTIC PRODUCT REVIEW Macro Research

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Q42014 real GDP growth at 5.94% YoY

As reported by the Nigerian Bureau of Statistics (NBS), Nigerias real GDP grew by

5.94% in Q414 (Q413: 6.77% YoY; Q314: 6.23% YoY). This was higher than the 4-

year fourth quarter average of 5.26% YoY and represents the second best fourth

quarter performance in the rebased series. The oil sector grew by 1.18% YoY in the

fourth quarter of 2014, reversing the 9.36% decline recorded in the fourth quarter of

2013. Despite this growth, the oil sector contributed approximately 8.97% to real

GDP in Q414, lower than the 10.45% contribution in Q314 and the 9.39% recorded

in Q413. Non-oil sector grew at 6.44% YoY, driven by growth in the crop production,

trade, textile, apparel and footwear, and real estate sub-sectors. Growth in the

Agriculture (23.86% of GDP) and Services (53.48% of GDP) sectors slowed to 3.64%

YoY (Q314: 4.47% YoY) and 6.15% YoY (Q314: 7.61% YoY) respectively. Contrary to

the third quarter, output growth in the Industrial sector (22.66% of GDP) increased

to 7.96% YoY (Q314: 5.43%) following the rebound in the Crude Petroleum sector,

thus offsetting the weakness in the Agricultural and Services sector.

Industrial sector provides support to growth

The positive performance in the Crude Petroleum and Natural Gas sub-sector (c.51%

of Industrys GDP) in the fourth quarter came as a pleasant surprise, given the

production and price challenges in the quarter under review. As reported by the

NBS, oil production volumes rose by 0.93% YoY and 1.40% QoQ to 2.18 million

barrels per day. Consequently, the Industry sector grew at 7.96 YoY, rising

significantly from the 5.43% YoY recorded in Q314. Consistent with previous

quarters, Manufacturing remains the fastest growing sector in the Nigerian

economy, with Chemical and Pharmaceutical Products (+32.92% YoY), Cement

(+32.01% YoY), Textiles (+30.74% YoY), Plastic and Rubber Products (+30.69% YoY),

and Non-Metallic Products (+29.56% YoY) as the five fastest growing sub-sectors.

Overall GDP growth negatively affected by Agriculture, Services

Agriculture sector output increased by 3.64% YoY in the fourth quarter, slowing

significantly from the 4.47% YoY increase recorded in Q314, in line with the usual

fourth quarter trend of a slowdown in agricultural output. Within the sector, Fishing

had the highest growth rate of 6.78% YoY, though its contribution is minimal. The

services sector also performed poorly in the fourth quarter, not surprising given the

pressures faced from the exchange rate which affected the telecoms sector (c.31%

of Services GDP). Services sector output grew by 6.15% YoY in the fourth quarter, a

slowdown from the third quarters 7.61% YoY rise and Q413s 8.72% YoY rise. This

negative performance was also evident on a quarterly basis, with Q42014 real GDP

growth for the services sector at 13.00% QoQ (Q314: 14.51% QoQ) and YoY growth

of 6.15% below the four year sector average of 7.49%.

Contact Information

[email protected]

+234 809 0415 178

[email protected]

+234 809 945 3062

Analyst:

Damilola Lawal*

[email protected]

Team Lead

Oluwatosin Ojo, CFA*

[email protected]


H12015 Earnings Update Q414 GROSS DOMESTIC PRODUCT REVIEW Equity Research

Cautious optimism ahead

First quarter real GDP has historically emerged the slowest, reflective of softer

growth in the Agriculture sector as the cycle changes from harvest to the planting

season. Thus, we expect Agriculture output to ramp up in the course of the

remaining quarters, providing some support to GDP growth. We think the services

sector could be the main casualty of sticky growth in household expenditure and the

expected slowdown in government expenditure given fiscal constraints. On the back

of these, we still maintain our 2015 real GDP growth projection of 5%. Domestic

challenges around policy inaction, oil theft and maintenance shutdowns have

continued to plague the Crude Petroleum and Natural Gas sub-sector. Projecting a

consistent trend in Nigeria's production numbers will be quite difficult, at least not

until the structural challenges confronting the sector are resolved. With crude

petroleum and natural gas accounting for more than half of the industrial sectors

GDP, the performance of the Industrial sector will, to a great extent, be shaped by

how the crude petroleum and natural gas sub-sector fares.

Figure 1: YoY Real GDP Growth Rate

Source: NBS

4.45%

5.40%5.17%

6.77%

6.21%6.54%

6.23%5.94%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14


Q414 GROSS DOMESTIC PRODUCT REVIEW Macro Research

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CardinalStone Research - Macroeconomic Note - Q4'14 GDP Review

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