Nigeria GDP (Q4 2020) - Capital Economics
Africa Economics

Nigeria GDP (Q4 2020)

Africa Data Response
Written by Virag Forizs

Nigeria’s Q4 GDP data showed that a poor performance in the oil sector was more than offset by a continued rebound in the non-oil economy. While we think that some of the headwinds facing the economy will subside in the coming months, the recovery will probably remain sluggish.

Oil and non-oil sectors diverge as economy rebounds

  • Nigeria’s Q4 GDP data showed that a poor performance in the oil sector was more than offset by a continued rebound in the non-oil economy. While we think that some of the headwinds facing the economy will subside in the coming months, the recovery will probably remain sluggish.
  • Figures released today showed that Nigeria’s GDP grew by 0.1% y/y in Q4, following a 3.6% y/y contraction in Q3. (See Chart 1.) The outturn was stronger than our forecast for GDP to drop by 0.6% y/y as well as the Bloomberg consensus estimate for a 1.9% y/y fall. Over the year as a whole, GDP fell by 1.9% – its worst performance since at least 1991.
  • The breakdown points to a large divergence in the performance of Nigeria’s oil and non-oil sectors. The oil industry’s struggles intensified in Q4. An OPEC+ deal weighed on oil output, pushing down production volumes from an average 1.67mn bpd in Q3 to 1.56mn bpd in Q4. This translated into a sharper fall in oil GDP, from a 13.9% y/y drop in Q3 to a 19.8% y/y plunge in Q4.
  • Weakness in the oil sector was more than offset by a continued rebound in the non-oil sector. (See Table 1.) The agriculture sector, which makes up more than a quarter of the economy, posted particularly strong growth of 3.4% y/y in Q4. And despite nation-wide protests in October 2020 and a resurgence of COVID-19 cases in December, the recovery in sectors hit hardest by containment measures – like retail trade, transport and hospitality – carried on in Q4. But the manufacturing industry remained weak.
  • Looking ahead, some of the economy’s headwinds will probably ease. A second wave of the coronavirus appears to be subsiding and Nigeria is set to receive its first batch of vaccines at the end of February. OPEC+ quotas are scheduled to increase in Q2, which will support the struggling oil sector.
  • That said, the recovery is likely to remain subdued. Widespread vaccine roll-out is unlikely in the near term, which will keep a lid on non-oil activity. And even with higher OPEC+ quotas, oil output will remain very low compared to pre-pandemic levels. We have pencilled in GDP growth of 3.5% this year.

Chart 1: Nigeria GDP (% y/y)

Source: NBS, Capital Economics

Table 1: Nigeria GDP (% y/y)

GDP

Oil

Non-oil

Agriculture

Wholesale & Retail Trade

Manufacturing*

Financial Sector

Q1 2020

1.9

5.1

1.5

2.2

-2.8

0.9

20.8

Q2 2020

-6.1

-6.6

-6.1

1.6

-16.6

-7.7

18.5

Q3 2020

-3.6

-13.9

-2.5

1.4

-12.1

-0.4

3.2

Q4 2020

0.1

-19.8

1.7

3.4

-3.2

-0.5

-3.6

Sources: NBS (*Note: Excludes oil refining)


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