Nigeria GDP (Q2 2020) - Capital Economics
Africa Economics

Nigeria GDP (Q2 2020)

Africa Data Response
Written by Virag Forizs

Nigeria’s GDP nose-dived in Q2 and we think the recovery will be held back by continuing oil production cuts, losses in employment and income and limited fiscal stimulus.

Plunge in output in Q2 to be followed by weak recovery

  • Nigeria’s GDP nose-dived in Q2 and we think the recovery will be held back by continuing oil production cuts, losses in employment and income and limited fiscal stimulus.
  • National accounts figures released today showed that Nigeria’s GDP plunged by 6.1% y/y in Q2. (See Chart 1.) The outturn was not quite as bad as we feared (we had pencilled in an 8.0% y/y contraction), but a much sharper fall than the Bloomberg consensus forecast for a 3.6% y/y decline in GDP.
  • The magnitude and breadth of the contraction highlights the blow that the coronavirus crisis and low oil prices dealt to Nigeria’s economy. Oil GDP shrunk by 6.6% y/y, shaving around 0.6%-pts off the headline rate. After holding up relatively well in Q1, the key sector faltered on the back of oil production cuts agreed by OPEC+; output dropped from 1.9mn bpd on average in Q1 to 1.7mn bpd over Q2.
  • The non-oil economy was, however, the key drag. Activity in the retail sector was held back by lockdowns in key commercial hubs, as well as containment measures imposed on other parts of the country. The manufacturing sector suffered a similar fate. Output in these sectors dropped by 8-17% y/y. (See Table 1.) The one crumb of comfort was the stellar performance from the financial sector, continuing its double-digit growth in Q2.
  • Looking ahead, we suspect that Nigeria’s recovery will be weak. OPEC production quotas will continue to weigh on the oil sector, especially if Nigeria bows to pressure from other members of the cartel to make compensatory cuts for overproduction in previous months. And other parts of the economy are likely to struggle as the economic damage caused by the crisis proves difficult to reverse in full; more than 15% of respondents in a survey by the Nigerian statistics agency have stopped working since the beginning of the outbreak. Nonetheless, the Q2 GDP figures mean that the risks to our forecast of a 5.5% contraction over 2020 as a whole lie to the upside.

Chart 1: Nigeria GDP (% y/y)

Source: NBS, Capital Economics

Table 1: Nigeria GDP

 

GDP

Oil

Non-oil

Agriculture

Wholesale & Retail Trade

Manufacturing*

Financial Sector

Q3 2019

2.3

6.5

1.9

2.3

-1.5

4.9

1.1

Q4 2019

2.6

6.4

2.3

2.3

-0.6

1.3

20.2

Q1 2020

1.9

5.1

1.6

2.2

-2.8

0.6

20.8

Q2 2020

-6.1

-6.6

-6.1

1.6

-16.6

-8.2

18.5

Sources: NBS (*Note: Excludes oil refining)


Virág Fórizs, Africa Economist, virag.forizs@capitaleconomics.com