As Nigeria’s oil production continues to dwindle, economists and analysts have predicted a slowing down of the nations’s Gross Domestic Product (GDP) figures which may impact negatively on the economy.
Amidst the backdrop of Nigeria’s recent lackluster Gross Domestic Product (GDP) figures, analysts have painted an uncertain outlook for the immediate economic future.
CardinalStone Finance, a Lagos-based investment firm, provided insights into the economy’s near-term prospects.
The firm adjusted its oil production projections for the third quarter of 2023 due to.
Revised oil production estimate impacts Q3 GDP growth
They lowered the oil production estimate to 1.3 million barrels per day (mb/d), resulting in a projected oil GDP growth of 8.3% Year-on-Year (YoY) for Q3’23, compared to the previous projection of 25.0% YoY.
Despite this, the analysts expressed optimism for the last quarter of the year, particularly in the energy sector.
They highlighted Seplat Petroleum Company’s completion of drilling five oil wells, three of which are expected to begin production.
The non-oil sector’s robust performance contributes to the analysts’ sustained forecast of 2.9% YoY growth for Q3’23.
This growth is driven by Information and Communication Technology (ICT) advancements, increased network coverage, elevated Capital Expenditure (CAPEX) spending, and credit growth in the financial services sector.
The agriculture sector’s outlook remains modest due to prevailing security concerns in the country. In light of all factors, the GDP projection stands at 2.9% YoY for Q3’23 and 2.8% YoY for the full year.
Commenting on the GDP performance, analysts expressed concerns about the sustainability of the growth trajectory considering the nation’s economic challenges.
The GDP growth in Q2’2023 showed a slight improvement compared to Q1’s growth, despite various economic hurdles such as high inflation, tariff increases, foreign exchange instability, and fuel subsidy removal.
The analysts at CardinalStone noted that Q2’23’s GDP growth was limited due to continued challenges in the oil and gas sector.
The oil sector’s decline impacted the overall growth, with oil production at a low point since 2013 due to leaks in the Forcados terminals, aging infrastructure, and workers’ strike.
On the non-oil front, the services sector remained robust, driven by credit creation and cross-border activities.
The ICT sector saw a decline, attributed to reduced telecommunication subscribers and teledensity, possibly due to decreased Work-From-Home (WFH) practices and cash availability.
Agriculture rebounded from the previous quarter’s contraction, and the manufacturing sector sustained growth due to Fast Moving Consumer Goods (FMCG) expansion.
In essence, while the GDP growth showed improvement in Q2’23, various factors and sectoral challenges raise concerns about the sustainability of economic growth in Nigeria.