Based on the recently released GDP report by the National Bureau of Statistics (NBS), Nigeria’s economy maintained its positive growth trajectory in Q3-24, growing by 3.46% y/y (Q2-24: +3.19% y/y). The growth rate was primarily driven by the non-oil sector, reflecting strong gains in the services sub-sector. Further out, the oil sector growth remained positive but slowed to 5.17% y/y in Q3-24 (Q2-24: +10.15%), while the non-oil sector growth expanded by 3.37% y/y (Q2-24: +2.80% y/y). On an attribution basis, the Services, Agriculture, and Industries sectors contributed 2.74%, 0.33% and 0.39%, respectively, to GDP growth.
Weak Investment Constrains Oil Sector GDP Growth
Oil sector growth moderated to 5.17% y/y in Q3-24 (Q2-24: +10.15% y/y | Q3-23: -0.85% y/y) primarily due to a high statistical base despite the modest improvement in domestic crude oil production compared to the corresponding period last year (1.55 mb/d vs Q2-24: 1.47 mb/d | Q3-23: 1.43 mb/d). While improved security measures have helped curb oil theft, output growth remained constrained by increased IOC divestments and ageing oil infrastructure, keeping output below historical levels (Q1-20: 2.10 mb/d).
Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed notable production increases at the Bonny (+58.9% y/y), Forcados (+50.6% y/y), and Bonga (+0.35% y/y) terminals within the review period. In contrast, production declined at the Qua Iboe (-29.1% y/y), Escravos (-8.2% y/y), and Agbami (-6.8% y/y) terminals.
Strong Service Sector Growth Masks Frail Agriculture & Manufacturing Sector Growth
The non-oil sector recorded an impressive growth performance despite multiple headwinds, rising by 3.37% y/y in Q3-24 (Q2-24: +2.80% y/y | Q3-23: +2.75% y/y). The improvement was primarily driven by the substantial growth in the services sector (+5.19% y/y vs Q2-24: +3.79% y/y) underpinned by the improvement across the finance & Insurance (+30.83% y/y vs Q2-24: +28.79% y/y), ICT (+5.92% y/y vs Q2-24: +4.44% y/y) and transportation (+12.15% y/y vs Q2-24: -13.53% y/y) sub-sectors. Specifically, higher commercial banks’ credit creation in line with the CBN’s 50.0% loan-to-deposit ratio supported the robust growth in the finance & insurance sector.
Additionally, the improved growth in telephone and internet subscriber base supported higher growth in the ICT sub-sector. Nonetheless, we highlight that growth remained constrained compared to historical levels (5-year average: +9.36% y/y), reflecting lower profit margins induced by heightened cost pressures from naira depreciation and regulatory constraints. Meanwhile, the trade (+0.65% y/y vs Q2-24: +0.70% y/y) and real estate (+0.68% y/y vs Q2-24: +0.75% y/y) sectors remained embattled with the impact of tight financial conditions, highly inflationary environment and currency pressures.
Elsewhere, the agriculture sector (+1.14% y/y vs Q2-24: +1.41% y/y) moderated, reflecting the impact of the lean season in Q3-24, as well as the downside impact of the persistent security problems and high input cost on agricultural activities. Furthermore, the manufacturing sector growth (+0.92% y/y vs Q2-24: +1.28% y/y) weakened on the back of existing challenges, including (1) frail consumer demand, (2) high energy prices, (3) elevated borrowing costs, and (4) naira depreciation.
Q4-24 Outlook: GDP Growth to Stabilize Amid Mixed Sectoral Performance
We expect GDP growth to maintain a steady trajectory in Q4-24. While the non-oil sector is poised for improvement, its gains are likely to be tempered by the subdued performance of the oil sector. Specifically, growth in the non-oil sector is projected to benefit from improvements in agriculture, manufacturing, and services.
For the agricultural sector, the main harvest season, spanning October to December, is expected to boost agricultural output and drive growth relative to the previous quarter. However, flooding in key food-producing regions is likely to constrain output, resulting in moderate year-on-year growth compared to Q4-23. Additionally, seasonal factors, including improved consumer demand during the festive period, are anticipated to support growth in the manufacturing sector.
Nonetheless, persistent downside risks – such as high production costs and tight financial conditions – may weigh on performance. Continued expansion in the telecommunications sector, driven by growth in the subscriber base and business innovations, is expected to underpin stronger growth in the services sector. At the same time, the financial services sector will likely remain robust as banks intensify risk asset creation to meet the Central Bank of Nigeria’s (CBN) stipulated 50.0% loan-to-deposit ratio. Consequently, we project the non-oil sector to grow by 3.57% y/y in Q4-24 (Q3-24: +3.37% y/y; Q4-23: +3.00% y/y).
In the oil sector, domestic oil production (using NUPRC oil production data), is expected to rise marginally to 1.57 mb/d in Q4-24 (Q3-24: 1.55 mb/d), supported by enhanced security, additional output from new oil streams, and reduced terminal shutdowns. However, due to the high statistical base of Q4-23 (1.53 mb/d; +12.11% y/y growth), the oil sector GDP is projected to slow significantly to 1.29% y/y in Q4-24 despite the marginal output increase.
Balancing these factors, we estimate GDP growth to remain steady at 3.47% y/y in Q4-24 (Q3-24: +3.46% y/y). This would bring the annual average growth rate for 2024E to 3.27% y/y, reflecting a notable improvement from 2.71% y/y in 2023FY.
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