Nigeria economy shrank in the first quarter of 2016 as oil output fell and the manufacturing, financial and real estate industries declined considerably. The National Bureau of Statistics report on the economy released yesterday said that the gross domestic product GDP contracted by -0.36 per cent from a year earlier suggesting that the economy has entered into recession. This compares with growth of 2.11 per cent in the previous three months. The last time the economy contracted was in the second quarter of 2004, according to data on the central bank’s website.
Falling prices of crude, from which the nation derives up to 70 per cent of state revenue, have caused the nation’s economic outlook to deteriorate as the government struggles to pay salaries and stimulate growth, forcing it to increase borrowing.
President Muhammadu Buhari has resisted calls from investors to devalue the naira, which has been pegged at N197-199 per dollar for more than a year.
“It is going to be a difficult year, and probably will go into next year because the causes of the economic troubles are still there,” Magnus Kpakol, Director at Abuja-based consultancy Economic and Business Strategies, said. “Oil prices are not just low, but production has also reduced.” Oil output fell to 2.11 million barrels per day in the first quarter, from 2.18 million barrels a year earlier. Oil contributed 10.29 per cent to GDP in the quarter through March.
According to NBS “In the First Quarter of 2016, the nation’s Gross Domestic Product (GDP) grew by -0.36% (year-on-year) in real terms. This was lower by 2.47 per cent from growth recorded in the preceding quarter and also by 4.32 per cent from growth recorded in the corresponding quarter of 2015. Quarter on quarter, real GDP slowed by 13.71 per cent. During the quarter, aggregate GDP stood at N22, 262,575.97 million (in nominal terms) at basic prices. Compared to the First Quarter 2015 value of N21,041,701.10 million, nominal GDP was 5.80 per cent higher. Nominal GDP growth was however lower relative to levels recorded in the last quarter of 2015 by 14.15 per cent points.
“The Nigerian economy could be better understood according to the oil and non-oil sector classifications. In the First Quarter of 2016, Oil production stood at 2.11million barrels per day (mbpd) 0.05mbpd lower from production in fourth quarter of 2015. Oil production was also lower relative to the corresponding quarter in 2015 by 0.07mbpd when output was recorded at 2.18mbpd.
“As a result, real growth of the oil sector slowed by 1.89 per cent (year-on-year) in first three months of 2016. This represents an improvement relative to growth recorded in the same period of 2015 when growth slowed by 8.15 per cent. Growth also increased by 6.39 per cent points relative to growth in fourth quarter of 2015. As a share of the economy, the Oil sector contributed 10.29 per cent of total real GDP, marginally lower from the share recorded in the corresponding period of 2015, yet higher from the share in fourth quarter of 2015 by 2.24 per cent points. While activities such as Crop production, Trade and Telecommunications & Information Services supported growth of the sector, growth was weighed upon by declines in Manufacturing, Financial Institutions, and Real Estate. The sector slowed 0.18 per cent in real terms in the first three months of 2016. This was 5.77 percent points lower from the corresponding quarter in 2014 and 3.32 per cent points from the previous quarter .
In real terms, the Non-Oil sector contributed 89.71% to the nation’s GDP, marginally higher from shares recorded in Q1 of 2016 (89.55) yet lower from and Q4 2015 (91.94%).
Crude Oil and Non-Oil Growth
According to NBS “Four main activities make up the Mining & Quarrying sector, they are Crude Petroleum and Natural Gas, Coal
Mining, Metal ore and Quarrying and other Minerals. On a nominal basis, the sector slowed by 34.98 per cent (year on-year) during the first three months of 2016. This was 11.22 per cent higher from growth recorded in 2015, and marginally higher from growth recorded in the previous quarter. The decline in year-on-year growth is attributable to the falling oil prices. The sector contributed 4.14 per cent to overall GDP in the first three months of 2016, lower than the contribution recorded in same quarter of 2015 and the preceding quarter by 2.60 per cent p and 1.04 per cent points respectively. In real terms, Mining and Quarrying sector slowed at 2.96 per cent (year-on-year) between January and March 2016, a relative improvement from the same period in 2015 by 4.94 per cent and Q4 2015 by 5.08% points.
“While Crude Oil output weighted on growth, the sector was supported by a substantial improvement in output in Metal Ores. The contribution of Mining and Quarrying to Real GDP in Q1 2016 was 10.34 per cent, marginally lower relative to the corresponding quarter of 2015 yet higher from the previous quarter by 2.13 per cent.
According to the report “In nominal terms, the agricultural sector grew by 14.15 per cent year-on year between January and March 2016. This was higher than growth rates recorded in the corresponding quarter of 2015 and the Q4 2015 by 6.71 per cent and 4.65 per cent respectively. Growth in the sector was driven by output in Crop Production accounting for 83.67 per cent of overall growth of the sector. Agriculture contributed 19.17% to nominal GDP during the quarter under review. This was higher than shares recorded in the corresponding period of 2015 by 1.40 per cent yet lower than the contribution in the last quarter of 2015 by 3.39 per cent.
“Real agricultural GDP growth in the first quarter of 2016 stood at 3.09 per cent (year-on-year), a decrease of 1.61 per cent from growth recorded in the corresponding period of 2015 and also lower by 0.39 per cent from the last quarter of 2015. While positive, growth in agricultural output has been relatively lower compared to the corresponding period of 2014 as a result of lower crop output which in turn was as a result of lower productivity during dry season farming during the quarter. Agriculture contributed 20.48 per cent to Real GDP during the quarter under review. This was higher than shares recorded in the corresponding period of 2015 by 0.69% points yet lower than shares recorded in Q4 2015 by 3.70% points.
“Nominal GDP growth of Manufacturing in Q1 2016 slowed by 2.98% (year-on-year), 4.23% points lower from growth recorded in Q1 2015 and 9.91% points lower from growth in Q4 2015 as a result of slower growth in 10 of 13 subsections of the Manufacturing sector. On a Quarter-on-Quarter basis, the sector slowed by 11.92%. The contribution of Manufacturing to Nominal GDP was 9.93% in Q1 2016, lower than the 10.17% recorded in the corresponding period of 2015, and marginally lower from 9.09 in Q4 2015. In Q1 2016, Real GDP growth of the manufacturing”
