Macroeconomic Report & Economic Updates

In the first quarter of 2019, total foreign trade increased to N8.24 trillion¹. This figure is 2.5% higher compared to 2018Q4 and 7.5% higher relative to the corresponding quarter in 2018 (2018Q1). The boost in trade resulted from increased values of both imports and exports. The value of total imports increased to N3.70 trillion, representing a 3.39% rise relative to 2018Q4. Similarly, export value was recorded at N4.54 trillion, which signifies a 1.78% rise compared to the fourth quarter of 2018. Improvements in both imports and exports retained the balance of trade in the positive terrain: at N831.6 billion. The quarter’s trade advancements may be attributed to export promotion policy, and more imports of agricultural products compared to the previous quarter. With the US$30 billion export-financing deal signed by the Nigerian government in February 2019², setting up special economic zones in Abia, Katsina, and Lagos, external trade is expected to increase significantly in the coming years. An important step in improving international trade is addressing non-trade barriers that undermine the country’s ability to extensively participate in trade such as inadequate infrastructure and inefficient and opaque border administration procedures.

The NBS National outcome report on Water, Sanitation and Hygiene (WASH), suggests improvements in achieving SDG 6 (clean water and sanitation) in Nigeria. Accesses to the three WASH areas is indicated to have advanced in five years, up until 2018. In 2013, 56.9% of Nigeria’s population had access to improved and safe drinking water; by 2018, those who had access increased to 73.4%¹. Similarly, although about 24.4% of Nigerian household members still practice open defecation, access to improved sanitation enhanced from 35.7% in 2013, to 57.4% in 2018. In terms of hygiene, about 91.4% of household heads were reported to have knowledge of at least two critical times for hand-washing. The remarkable advancements and progress in achieving the SDG 6 may not be unconnected to policy collaborations and structured multi-sectored partnerships between the Nigerian government and international partners like UNICEF. For instance, the Federal Ministry of Water Resources and National Open Defecation Free (ODF) road maps², and the PEWASH (Partnership for Expanded Water Supply and Sanitation) policy introduced in 2016³, have provided coordinated framework, strategies, and projects responsible for the recent progress and towards 100% achievement of goal 6 by 2030. Going forward, more exchanges with other African countries on progress, challenges, and needs in the critical areas of the use of data and technological advances is key to better implementation and monitoring.

The value of non-oil exports increased in the first quarter of 2019. According to the latest CBN quarterly economic report, non-oil exports totalled up to US$1.26 billion in 2019Q1¹, indicating 14.9% quarter over quarter (QOQ) increase and 41.2% year-on-year growth rate. Significant increases were observed in and driven by receipts from all reported sectors, however, three sectors stand out: minerals, manufacturing, and agricultural sectors, following likely sectoral improvements. Export earnings from minerals amounted to US$750 million and accounted for about 60% of total earnings for the quarter. Similarly, earnings from manufacturing and agricultural sectors grew QOQ by 19.1% and 12.8% to US$190 million and US$160 million respectively. Both sectors accounted for 27.5% of total non-oil export earnings for the quarter. Given that the government is prioritizing the diversification of the country’s revenue base and the afore-mentioned sectors play a key role in the diversification process, we expect continuous growth in these sectors. However, the lack of connective infrastructure to convey equipment, products, and workers, as well as the ports congestion that affects the competitiveness of exports should be addressed.

The Nigerian economy slowed in the first quarter of 2019 as real GDP growth rate fell to 2.1%¹, from 2.38% in 2018Q4. Aggregate nominal GDP fell by 9.75% to ₦32 trillion in the review quarter, and growth rates in both sectors (oil and non-oil) slowed. Real GDP growth in the oil sector was -2.40% in Q1 2019 indicating a decrease by -0.79% points relative to the rate recorded in the preceding quarter of 2018. Similarly, at 2.47% growth rate in real terms, the non-oil sector slowed slightly from the 2.7% recorded in 2018Q4. The overall economic performance in 2019Q1 fell short of the CBN’s 3% growth projection, and reflects decelerated economic activities likely occasioned by the uncertainties and lackluster execution of policies during the election period in 2019Q1. Following projections from the IMF, growth is expected to stabilize at around 2% in 2019. To improve growth, we recommend that the government undertakes sweeping reforms that involves non-financial incentives capable of attracting large investments. These non-financial incentives, such as promoting a good investment climate and easing bureaucracy and the regulatory environment, will also improve the effectiveness of financial incentives.

Domestic oil production output increased to 1.82 million barrels per day (mbpd) in the month of April 2019¹. According to the global oil cartel, OPEC, Nigeria’s crude oil production rose by 5.3%, from 1.7mbpd reported in March 2019. Although the increase likely suggests less disruptions to major oil pipelines in Nigeria and is considered necessary to meet fiscal obligations, it positions Nigeria as a non-compliant OPEC member. Essentially, while Nigeria attempts to gradually step up to producing close to the 2019 budget benchmark of 2.3mbpd to allow for adequate budget funding, the country reneges on the quota of 1.69mbpd signed under the OPEC supply cut agreement. With major investments being undertaken in the oil and gas sector such as Pan Ocean Oil Corporation Limited’s infrastructure projects in gas pipeline, gas processing plant, and early production facility, crude oil production is expected to rise in the coming months. With Nigeria’s production being a negligible component of OPEC’s total production, non-compliance to the agreement should not destabilize the oil market.