Real GDP growth improved to 1.8% y/y in Q3'18 driven wholly by the continued expansion in non-oil activities to 2.3%, the highest since 2016. The services sector is largely responsible for the sustained improvement in the non-oil sector, on account of growth in information & communication technology (ICT). Our Economist hold that for economic growth to be inclusive, the FG has to ensure that real GDP grows at a faster rate than population growth. We believe that intensifying focus on the Economic Recovery and Growth Plan (ERGP) reforms in Q1'19 will improve non-oil sector growth, particularly in manufacturing. This growth should be supported by ongoing business reforms including legislative reforms facilitated by the Presidential Enabling Business Environment Council (PEBEC) and the Senate. Furthermore, boosting oil production to normal level may provide much-needed revenues to support macro-economic growth.

1. Economic growth improves on account of activities in the non-oil
sector
Real GDP growth improved to 1.8% y/y in Q3'18 driven wholly by the
continued expansion in non-oil activities to 2.3%, the highest since 2016.
The services sector is largely responsible for the sustained improvement
in the non-oil sector, on account of growth in information &
communication technology (ICT).
Activities in the oil sector remain depressed with weak growth recorded
in Q2 and Q3'18. The sector experienced declined growth to 2.9% y/y in
Q3'18, the second lowest in four quarters, as the oil production curve
sloped to 1.7 million barrels per day (Q3'17: 1.85 mbpd) from 2 million
mbpd in Q1'18. Current oil production is far below the 2 mbpd average
recorded in Q1'18.
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Contribution to real GDP growth
Source: NBS, PwC analysis
Nigeria Economic Alert
Q3'18 GDP report: Economic growth sluggish, as
recovery continues at a slow pace
17 December 2018
-1.5
-1.0
1.0
1.5
2.0
2.5
-10
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
Q2'17 Q3'17 Q1'18 Q2'18 Q3'18
Non-Oil GDP Oil GDP Real GDP
Agricultural output grows marginally as flooding hampers
farming activities
Agricultural growth improved slightly to 1.9% Q/Q (Q2'18: 1.2%);
rebounding from the downward trend that commenced in Q2'17.
However, the sector's growth was still lower than Q3'17 growth of
3.1%. The agriculture sector continues to be impacted by varying
crises at distinct periods of its business cycle. This time around,
flooding across major farming belts in 10 states ruined crops for
100,000 farmers. This has dampened the ongoing harvest season, as
the Federal Ministry of Agriculture issued a warning in October that
there is likely to be shortage of rice, the country's staple crop. These
types of severe weather events will be more frequent because of
climate change, so we need to build resilience.
Manufacturing growth recovers due to currency stability
Manufacturing growth increased to 1.9% y/y in Q3'18 from 0.7% y/y in
Q2'18. The cement industry outperformed other segments with growth of
8% y/y from 3.9% in Q2'18. This was followed by the food, beverage and
tobacco sector with growth of 2.9% (Q2'18: 1.2%). The sector bounced
back slightly from its lowest drop in six quarters. The improvement in
manufacturing activities could be attributed to increased FX liquidity and
sustained exchange rate stability, which has impacted manufacturing
output.
Economy remains fragile despite improved macro-economic growth
With population growth rate averaging 2.6% annually, the country's
population is rising faster than average GDP growth in 2018, eroding any
gains in economic recovery. Lower oil production and crude prices
remain key downside risks to sustained economic recovery, especially in
2019.
Economic performance of the non-oil sector has also been marginal
hampered by lackluster growth in agriculture and industrial activities,
further affected by weak household consumption growth. We anticipate a
slight boost in consumer demand fueled by pre-election spending and
year-end festive activities.
Going forward, the FG has to ensure that real GDP grows at a faster rate
than population growth for economic growth to be inclusive. We believe
that intensifying focus on the Economic Recovery and Growth Plan
(ERGP) reforms in Q1'19 will improve non-oil sector growth, particularly
in manufacturing. Also, this growth should be supported by ongoing
business reforms including legislative reforms facilitated by the
Presidential Enabling Business Environment Council (PEBEC) and the
Senate. Furthermore, boosting oil production to normal level may provide
much-needed revenues to support macro-economic growth.
Andrew S Nevin (PhD)
Partner & Chief Economist
PwC Nigeria
andrew.x.nevin@pwc.com
Omomia Omosomi
Senior Industry Analyst
PwC Nigeria
omomia.omosomi@pwc.com
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