Nigeria’s economy not yet in full sail on lack of steady performers in non-oil sector – FBNQuest

In the aftermath of the release of growth figures for the Nigerian economy in Q2 2017, financial analysts at FBNQuest, an investment banking arm of FBN Holdings, are cautious on the possible growth trajectory of the economy, saying the 0.55 growth recorded may not have a firm footing since there appears a lack of steady performers in the non-oil sector of the economy.

In their Good Morning Nigeria Note Thursday, the analysts noted that the lack of steady performers in Nigeria non-oil economy indicates that there is no momentum for a strong recovery.

The basis of their argument is the fact that strongest performers in Q1 year-on-year, transportation & storage, contracted in Q2 and were replaced by financial & insurance, which was just above waters in Q1 as well as agriculture posting a weak growth in the referenced period.

They, therefore, described the development as tentative recovery since trade, the second largest sector of the economy, again contracted, as it has in every quarter since Q1 2016, which according to them is the most reliable measure of demand across all income levels.“There are no steady performers in the non-oil economy (other than agriculture), indicating that there is no momentum for a strong recovery.

“There are no steady performers in the non-oil economy (other than agriculture), indicating that there is no momentum for a strong recovery.

“Transportation and storage, the strongest performer year-on-year in Q1, contracted. Its place has been taken by financial and insurance, which posted very modest growth in Q1. The information and communications sector contracted. We cannot, therefore, identify sectors set to deliver a recovery,” they said.

The National Bureau of Statistics figure equally indicated that the performance of Nigeria’s agriculture sector in Q2 2017 was the weakest for more than 2 years, which to many is not a good indicator for growth since the sector accounts for a quarter of the total economy.

National accounts for Q2 2017 show agriculture expanded by 3.0 percent year-on-year and industry by 1.5 percent while services contracted by -0.9 percent.

The analysts specifically highlighted that the poor performance of the agriculture sector was a disappointment in view of the reforms in the sector.

From the national accounts for Q2 2017 they highlight the five best performing sectors, covering only those sectors accounting for at least 1 percent of GDP at constant basic prices, and excluding other services, pointing out that industry returned to positive growth because of crude petroleum and natural gas, which expanded by 1.6 percent year-on-year after six quarters’ contraction.

In their view, manufacturing was boosted by the 2.7 percent year-on-year growth of its largest segment (food, beverages, and tobacco).

“The segment has benefited more than most from the greater availability of fx under the CBN’s multiple currency practices. We do not see any dramatic improvement in demand: rather, the sector has been able to restore output with its access to more, and more competitively priced imported inputs,” they noted.