Real GDP Growth Expands to 3.19% in Q2 2024

Nigeria’s real GDP growth maintained its positive trajectory in Q2 2024, expanding by 3.19%, up from 2.98% in Q1 2024 and 2.51% in Q2 2023. This sustained growth momentum was primarily driven by the services sector, which grew by 3.79% and contributed 58.76% to the overall GDP. While the expansion in real GDP highlights the resilience of Nigeria's economy, it is notable that only 16 of the 46 activities tracked by the NBS expanded, suggesting a non-inclusive growth. What is more disturbing is that most of the productive sectors either slowed or contracted, largely reflecting the impact of interest rate hikes, the time lag between currency appreciation and impact, higher logistics costs, and weak aggregate demand. The oil and non-oil sector

The oil sector, which is a major source of revenue and foreign exchange earnings, grew by 10.15% in Q2 2024, up from 5.70% in Q1 2024 and -13.43% in Q2 2023. This was largely supported by increased oil production (due to increased efforts to curb oil theft and pipeline vandalism) and higher oil prices. Domestic oil output rose by 15.57% to 1.41 million barrels per day in Q2 2024 from 1.22 million barrels per day in Q2 2023, but down from 1.57 million per barrel in Q1 2024. However, oil prices increased by 3.65% to $84.72 per barrel in Q2 2024 from $81.74 per barrel in Q1 2024. The oil sector contributed 5.70% to GDP in Q2 2024, up from 5.34% in Q2 2023 and down from 6.38% in the preceding quarter.

In the second quarter of 2024, the non-oil sector grew by 2.8%, the same level of growth recorded in Q1 2024. However, it declined relative to Q2 2023, when it expanded by 3.58%. This flat-lining and slow pace of growth largely reflects the impact of weak aggregate demand, higher logistics costs, interest rate hikes, and the time lag between currency appreciation and impact. In the second quarter of 2024, the non-oil sector accounted for 94.30% of the total GDP, which is a decrease from 94.66% in Q2 2023 but an increase from 93.62% in Q1 2024.

Sector Breakdown – 16 expanded, 19 slowed while 11 contracted A breakdown of the report showed that of the 46 activities tracked by the NBS, only 16 expanded, while 19 slowed and 11 contracted. Notably, most of the productive sectors either slowed or contracted, highlighting the impact of interest rate hikes, currency depreciation, and higher energy prices on business operating and logistics costs. Firms are also battling with reduced demand due to the squeeze in consumer wallets. GDP Outlook We expect a further increase in real GDP growth in the third quarter of 2024 due to several factors. Firstly, the harvest season is expected to boost commodity supply, thus bolstering agricultural sector growth. In addition, the reversal in the upward inflation trend increases the chances of the MPC halting the interest rate hikes, and possibly commencing its easing cycle if the decline in inflation is sustained in the coming months. Also, the minimum wage increase is expected to boost consumer spending, pushing up aggregate demand.