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FDC predicts Q2 GDP to remain relatively flat as output indicators contract

Avatar-1
Afolabi Oluwaseun

Oluwaseun Afolabi is Businessamlive Reporter.
You can contact him on afolabi.oluwaseun@businessamlive.com with stories and commentary.

August 7, 2018678 views0 comments

In an early Q2 gross domestic product growth (GDP) call, analysts at Financial Derivative Company (FDC) are predicting that based on the performance of output indicators, Nigeria’s GDP will be relatively flat when the numbers come in from the national statistics office.

In their LBS executive breakfast report, the financial think-tank predicted GDP to come in flat at 1.9 percent same figure as Q1 2018.

“The last GDP figure in Q1 2018 was 1.95 percent, looking forward to Q2 2018, we expect GDP to remain relatively flat compared to Q1 2018’s figure. This is because, if you look at output indicators like PMI, which is indicative of activities in the manufacturing sector, it slipped into contraction region.

“We also have epileptic power output; we are still below 4000mw per hour and we have had power shortages throughout the quarter. Again, a look at everyday oil production shows decline between Q1 and Q2 2018 by about 6 percent. So these indicators point to the fact that Q2 GDP will remain relatively flat,” Olugbile Temitope, a research analyst at FDC said.

On the difference between the Q1 2017 performance and Q1 2018 performance, she said we are still operating on the same platform, citing the performances of the oil and gas sector and agricultural sector, as they were the major drivers of growth in Q1 2017. She noted that lagging sectors remain the major drivers in Q1 2018 and the sectors, which are interest rate sensitive, continue to lag behind as CBN maintains status quo on rates.

“To large extent, I will say we are operating on the same platform because if you look at Q1 2018 figures, oil and gas remained one of the fastest growing sectors, as well as agriculture. But if you look at the lagging sectors, you will notice that these sectors are interest rate and labour sensitive and they showed contraction in Q1 2018, which is not so different from where we are coming from in 2017. The only difference is that the total growth rate went from a contraction to expansion, with the sectors that are driving the growth remaining the same,” she said.

The research analyst also added that it is unforeseeable that any aggressive CBN policy could change things rapidly.

She said, “right now, I don’t foresee any aggressive policy that will change the whole thing around, and so we will see that oil and gas will remain one of the fastest growing sectors as oil revenues are still pretty decent, the agricultural sector will continue being one of the growth drivers and lagging sectors will still be interest rate sensitive sectors. The CBN just maintained status quo some weeks back and so the interest rate is still high and breeds a risk and challenges of high borrowing cost of this sector.”

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