February 2, 2018//-Recent data suggest that Nigeria’s economic recovery is gaining steam, although activity is still weak.
GDP growth picked up pace in the third quarter due to faster growth in the oil sector, however, the rest of the economy performed poorly, according to the February 2018 estimate compiled by FocusEconomics, a leading provider of economic analysis and forecasts for 127 countries in Africa, Asia, Europe and the Americas.
“Available data for the fourth quarter suggests that the economy is gaining traction: The Purchasing Managers’ Index (PMI) rose to a multi-year high in December and higher oil prices throughout the quarter bode well for oil production revenues.
However, the outlook for the oil sector soured in January amid threats from militants”, the report noted.
On 17 January, the Niger Delta Avengers vowed to resume attacks on oil infrastructure after their demands for a greater share of oil revenue were not met.
Attacks on pipelines and other infrastructure were a factor in Nigeria’s oil production plummeting in 2016. In addition, although the Petroleum and Natural Gas Senior Staff Association of Nigeria—a major oil union—suspended a planned strike at the end of December, tensions remain high and threats of industrial action linger.
The FocusEconomics panel shaved 0.1 percentage points off Nigeria’s forecast this month and now see GDP expanding 2.5% in 2018. While higher oil prices, recovering household demand and higher production will lift growth this year, still-high inflation and a weak business climate will keep the recovery modest.
In 2019, GDP is seen expanding 3.2%. Inflation stayed high in December, coming at 15.4% (November: 15.9%). Our panelists see price pressures moderating starting in Q2 and averaging 12.6% in 2018. In 2019, inflation is seen averaging 10.4%.
Outlook
The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) jumped in December, ending the year at a three-year high. The PMI came in at 56.8, above November’s 55.2. The indicator lies comfortably above the 50-point threshold that separates expansion from contraction in business conditions, pointing to robust growth in the private sector.
The report continued: “Record fast growth in new orders drove the PMI’s surge, alongside buoyant output growth. Strong demand led employers to hire additional workers in December and purchasing activity also increased”.
On the price front, input price inflation eased from November’s 10-month high in December. While overall the survey’s result was positive, Stanbic IBTC Bank Economist Ayomide Mejabi cautioned that, “challenges with petrol supply which emerged in the later part of December likely disrupted business activity and general consumer sentiment” at the end of the month.
FocusEconomics Consensus Forecast panelists expect gross fixed investment growth to reach 3.1% in 2018, up 0.1 percentage points from last month’s forecast. For 2019, panelists forecast an increase of 2.5%.
Panelists participating in the Nigeria FocusEconomics Consensus Forecast project the economy will expand 2.5% in 2018, down 0.1 percentage points from last month’s forecast. For 2019, panelists expect the economy to grow 3.2%.
Inflation slows marginally
In December, consumer prices increased 0.59% on a month-on-month basis, below November’s 0.78% growth. December’s reading marked a fresh over two-year low following a downward trend observed since February 2017.
The moderation was broad-based including slowing in food and non-farm produce prices. Inflation came in at 15.4% in December, the lowest level since April 2016 and below November’s 15.9%.
Despite moderating significantly over the course of last year (January 2017: 18.7%), inflation in Nigeria remains well above the Central Bank’s target range of 6.0%–9.0%.
Core consumer prices, which exclude volatile agricultural produce, grew 0.50% in December, notably below the 0.80% reported in the previous month. Meanwhile, core inflation dipped to the lowest rate in five months at the end of the year, coming in at 12.6% in December compared to November’s 12.7%.
FocusEconomics Consensus Forecast panelists expect inflation to average 12.6% in 2018, up 0.2 percentage points from last month’s forecast. For 2019, panelists forecast an inflation rate of 10.4%.
African Eye Report
