Service Sector Drives Nigeria’s 2.98% GDP Growth Q1 2024

Nigeria’s Gross Domestic Product (GDP) growth rate slowed to 2.98 percent, in real terms in the first quarter of the year (Q1 2024), compared to 3.46 percent in the preceding quarter, the National Bureau of Statistics (NBS) said on Friday.

The growth was however, higher compared to the 2.31 percent recorded Q1 2023.

According to the Nigerian GDP Report Q1 2024, released by the statistical agency, in the quarter under review, aggregate GDP stood at N58.86 trillion in nominal terms compared to N51.24 trillion in Q1 2023, indicating a year-on-year nominal growth of 14.86 percent.

Growth was driven mainly by the services sector, which recorded a growth of 4.32 percent and contributed 58.04 percent to aggregate GDP.

The non-oil sector contributed 93.62 percent to growth in real terms, lower than 95.30 percent in the preceding quarter as well as 93.79 percent in Q1 2023.

The sector grew by 2.80 percent in real terms during the reference quarter compared to 0.28 percent in Q4.

On the other hand, the oil sector contributed 6.38 percent to the economy in Q1 compared to 4.70 percent in Q4 and 6.21 percent in Q1 2023.

The real growth of the oil sector was 5.70 percent (year-on-year) in Q1, indicating an increase of 9.91 percent when compared to -4.21 percent in the corresponding quarter

Oil sector growth also decreased by 6.41 percent compared to 12.11 percent in Q4 2023.

However, quarter-on-quarter basis, the oil sector recorded a growth rate of 13.77 percent in the review period.

In Q1, average daily oil production rose to 1.57 million barrels per day (mbpd), compared to 1.55 mbpd in Q4 and 1.51mbpd in the corresponding quarter of 2023.

According to the report, agriculture contributed 21.07 percent to GDP in real terms in Q1, lower than 26.11 percent in the preceding quarter and 21.66 percent in Q1 2023.

Manufacturing contributed to 9.98 percent to growth in Q1, lower than 8.23 percent in Q4 and 10.13 percent in Q1 2023.

Also, trade contributed to 15.70 percent to GDP, lower than 15.50 percent the preceding quarter as well as 15.97 percent in Q1 2023.

Furthermore, the Art, Entertainment and Recreation sector contributed 0.31 percent to real GDP in Q1 compared to 0.21 percent in the preceding quarter.

However, reacting to the GDP figures for Q1, Head, Financial Institutions Ratings at Agusto & Co, Mr. Ayokunle Olubunmi, said the performance may have surpassed expectations given the rate of Naira devaluation within the period in review.

But he said the growth estimates was not good enough given that it was almost at par with population growth rate, adding that the performance would not be enough to catalyse the economy.

He told THISDAY, “I think also its GDP growth was higher than what people expected given the level of devaluation.

“Although it looks better it is not good at the same time because if you analyse it, you notice that it is almost at the rate at which the population is growing.”

He also predicted that growth was likely to sluggish in the second quarter.

According to him, “The second quarter, the GDP growth may not be that high. The second quarter is where we had the full impact of the devaluation and economic activities were actually affected.

“The second quarter is where the CBN’s contractionary policies were implemented.

So, in summary, the GDP growth is positive because it is not negative and also because it is almost at par with the population rate.

“However it is not significant to catalyse the economy. Given the state of the economy, we need around 4 percent growth.”

Olubunmi said, “For now, it is going to be difficult for us to have a high growth rate because if you look at the contractionary policy of the CBN is going to reduce the volume of economic activities.

“Since the tightening, credit to the private sector has reduced.

However, for now, to increase growth, there have to be boosters from the fiscal side and resolve some structural issues we have in the economy.

“For instance, insecurity and also infrastructure issues such as power if improved can enhance manufacturing activities.”

Meanwhile, the Central Bank of Nigeria (CBN) at its just concluded liquidity mop-up this week raised an estimated N1.8 trillion from Open Market Operation (OMO) and Nigerian Treasury Bills (NTBs) as investors massively went for long term government securities.

T-Bills are short-term debt securities issued by the government to make up for budget deficit and fund projects, while OMO is basically designed to be a short-term market instrument that the CBN uses to control the supply of money in the economy.

The auction results seen by THISDAY revealed that CBN sold an estimated N1.16 trillion during the OMO auction of May 22, 2024 and sold N638.98 billion NTB when it conducted its auction on May 24, 2024.

For the NTB auction, investors demonstrated robust demand with N1.59 trillion subscriptions across three tenors during the auction held on May 22, 2024.

However, they offered a total of N508.98 billion, with subscription levels significantly surpassing the initial offer, highlighting the continued appetite for fixed-income securities amidst a volatile economic landscape.

Despite the oversubscription, only about N638.98 billion was allotted to investors with the 364-day bill securing the most.

The 364-day treasury bills for 20.69 percent in stop rates suggesting a true yield of about 26.1 percent. NTBs interest are paid upfront, thus the actual yield is higher than the nominal rates offered.

The heightened interest in treasury bills could be attributed to a spate of increase in the Monetary Policy Rate (MPR), which has made government securities more attractive to yield-seeking investors.

In the 91-day NTBs segment, where investor interest was subdued, the CBN offered N331.01 billion as subscriptions, however, totaled only N124.92 billion, which was well below the amount offered.

Eventually, only N60.69 billion was allotted, with the range of bids for this tenor spanning from 15.0000% to 20.9410%, and the stop rate settling at 16.5000%.

This lower subscription and allotment, in comparison to the offer, suggest a preference among investors for longer-term securities.

For the 182-day treasury bills, the CBN’s offer stood at N9.3 billion. Subscriptions came in significantly higher at N33.21 billion, while the allotment was N28.46 billion.

The bid range for these bills varied between 16.8000% and 22.0000%, concluding with a stop rate of 17.4490%.

The 364-day treasury bills attracted the most substantial interest. Against an offer of N168.67 billion, subscriptions soared to N1.43 trillion, resulting in an allotment of N549.83 billion.

Bids for this category ranged from 18.5000% to 26.6780%, with a final stop rate of 20.6900%.

For the OMO auction, the CBN offers bills worth N500.00 billion – N75.00 billion for the 95-day,N75.00 billion for the 179-day and N350.00 billion for the 361-day – to investors.

Demand was healthy as total subscription settled at N1.16 trillion (bid-to-offer: 2.3x), as the CBN allotted all available bids across the three tenors – N10.00 billion for the 95-day, N5.65 billion for the 179-day and N1.14 trillion for the 361-day – at respective stop rates of 19.00% (previous: 18.99%), 19.74% (previous: 19.48%), 22.49% (previous: 21.50%).

Analysts at Cordros Research  stated that it anticipated yields in the NTB secondary market would likely rise from current levels, given the prospects of tight liquidity conditions in the financial system.

James Emejo, Nume Ekeghe and Kayode Tokede

Follow us on: