Macroeconomic Report & Economic Updates

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.

A total of ₦342.6 billion was generated internally as revenue by 35 states and the FCT in 2018Q4¹. The figure indicates a growth rate of 22.8% compared to ₦264.3 billion generated in the previous quarter. For the fiscal year, 2018, total IGR rose by 24.8% to ₦1.17 trillion, from ₦936.5 billion recorded in 2017. While only five states recorded a decline in the review quarter, 31 states recorded IGR growth. The overall IGR growth emanated from improvements in tax revenue as total tax revenue accounted for 77% of total IGR. By states, Lagos state led the pack with ₦382.2 billion at full year – representing 33% of all states’ IGR. Rivers followed closely with ₦112.8 billion, Ogun ₦84.6 billion, Delta ₦58.4 billion, and Kano with ₦44.1 billion. The growth in IGR implies more autonomy and less reliance on FAAC allocations, as well as a larger pool of funds for development needs. Efforts towards sub-national specialization and spatial integration that encourage economic specialization in states as well as  inter-state trade such as building connective infrastructure and establishing special economic zones will prove useful in enhancing the IGR

According to the UNFPA, Nigeria’s population increased from 195.9 million in 2017 to 201 million in 2018¹ – representing an annual increase of about 2.6%. The age composition of Nigeria’s population indicated that 54% Nigerians fall between ages 15-64, 44% between 0-14, and a paltry 3% between 65 and above. Two demographic dimensions are visible in the rising population: while the youth population continues to expand due to limited progress in reducing fertility rate and family planning (fertility rate reduced by only 1.1% in 50 years), the older population continues to shrink. The latter is congruent with the low life expectancy in Nigeria; which at 55 years, is one of the lowest in the world and accounts for the low percentage of the population within 65 and above. Life expectancy in Nigeria is often shortened by deaths caused by various diseases and other health related cases - a situation that is worsened by the country’s dilapidated health care system. Given the growing youth population, job creation should be a priority in the national agenda to prevent an escalation of security, health and livelihood crisis in the country. In addition,   creating  awareness and subsidizing  family planning solutions is also essential