Real GDP Growth Slows to 2.98% in Q1’24

The Nigerian economy expanded by 2.98% in the first quarter of 2024, marking a decrease of 0.48% from the 3.46% growth recorded in Q4’23, yet showing a 0.67% improvement compared to the 2.31% growth posted in Q1’23. The sustained positive growth trajectory was primarily supported by the services sector, as most productive sectors were adversely affected by sharp Naira depreciation, heightened insecurity, weakened purchasing power due to soaring inflation, and the Central Bank of Nigeria’s (CBN) aggressive monetary tightening measures.

During the review period, only 14 of the 46 activities tracked by the NBS expanded, while 19 slowed and 13 contracted. The agricultural sector slowed by 1.92% to 0.18%, reflecting the impact of insecurity challenges in food-producing states, increased logistics costs, infrastructure deficits, and exchange rate pass-through. The trade sector also decelerated by 0.17% to 1.23% due to weak demand amid cost pressures resulting from exchange rate depreciation. Meanwhile, the construction sector contracted by 2.14% due to subdued demand amidst rising costs of building materials.Both the oil and non-oil sector slowed

In Q1’24, the oil sector, which is a major source of revenue and foreign exchange earnings, expanded by 5.70%. This growth rate was 6.41% lower than the 12.11% recorded in the previous quarter but surpassed the negative growth of -4.21% seen in the same period of 2023. Despite an uptick in average oil production, the sector's growth was sluggish, indicating that the production increase failed to fully offset losses incurred due to declining prices. Domestic oil output rose by 1.29% to 1.57 million barrels per day in Q4’24 from 1.55 million barrels per day in Q4’23, while oil prices decreased by 1.30% to $81.74 per barrel in Q1’24 from $82.82 per barrel in Q4’23. The sector's contribution to GDP increased to 6.38% from 4.6% in Q4’23 and 6.21% in Q1’23. During the same period, the non-oil sector grew by 2.8%, down from 3.08% in Q4’23 but higher than the 2.78% in Q1’23. Growth in this sector was propelled by finance and insurance (financial institutions), information and communication (telecommunications), agriculture (crop production), trade, and manufacturing (food, beverage, and tobacco). The sector's contribution to GDP decreased to 93.62% in Q1’24, compared to 95.30% in Q4’23 and 93.79% in Q1’23.

GDP Outlook

We expect real GDP growth to remain positive but could decline further quarter in the second quarter due to the lagged effect of sharp currency depreciation and the CBN’s aggressive monetary tightening. This would be exacerbated by supply shortages in the agricultural sector, as Q2 marks the peak of the planting season. The sustained positive growth trajectory is likely to embolden the more hawkish members of the Monetary Policy Committee (MPC) to consider further hikes in the monetary policy rate at their next meeting in July if inflation fails to moderate as expected.