Recent growth data released by Nigeria’s statistical agency, the National Bureau of Statistics (NBS), indicate that the country’s non-oil sector strengthened to 2.0 percent year-on-year in the quarter ended June 2018 from 0.4 percent a year earlier, its fastest growth in 10 quarters.
In a commentary on the NBS data, analysts at Renaissance Capital say the sector’s recovery was driven by telecoms, broadcasting, construction and road transportation.
Telecoms’ year-on-year growth surged to its highest rate this decade, 11.5 percent in 2Q18 against -1.9 percent a year ago on strong subscriber growth.
Specifically MTN saw its subscriber base increased by 2.9 million to 55.2 million in 2Q18, according to David Ferguson, Renaissance Capital’s media and telecoms analyst.
RenCap equally attributed the strong 7.7 percent year-on-year growth in construction as against 0.1 percent a year earlier, to the stepping up of capex by the government ahead of elections.
However, the crop production segment of the sector fell to its slowest rate this decade to 1.5 percent as against 3.2 percent a year ago, partly attributable to the herdsmen-farmers conflict in the Middle Belt.
“We also note a corresponding improvement in the cement sector’s y-o-y growth to
3.8 percent in 2Q18 vs. -4.2 percent a year ago. Road transport’s YoY growth jumped to 23% vs – 7.2% in 2Q17, which we found surprising, given that trade is still in the doldrums,” they noted in their Economics Research Update released Tuesday.
Wholesale and retail trade, the second-biggest sector, saw its contraction deepen to 2.1 percent in the review period, which the analysts attributed to weak consumption.
On the overall slowdown in growth to 1.5 percent in from 2.0 percent in the preceding quarter ended March, they said it was partly due to a 4.0 percent contraction in the oil sector, which masked stronger non-oil sector growth.
They also noted that the biggest non-oil sectors – crop production, wholesale and retail trade and manufacturing equally underperformed.
“We believe this is in part due to a weak consumer. Due to trade’s protracted slump, the sharper-than-expected slowdown in crop production, the peaking of oil production, and the weak consumer’s cap on manufacturing, we lower our 2018 growth forecast to 2.0 percent, from 2.9 percent previously. We also lower our 2019 forecast to 2.5 percent, vs 3.0 percent,” the RenCap analysts said.
“We are revising down our 2018 and 2019 growth forecasts due to sluggish wholesale and retail trade; a sharper-than-expected slowdown in crop production; the peaking of the oil sector’s recovery; and the weak consumer’s cap on manufacturing. Our 2018 growth forecast has been lowered to 2.0 percent, from 2.9 percent previously, and our 2019 forecast to 2.5 percent, from 3.0 percent.
They said they expect the bigger-than-expected NGN9.1trn FY18 budget that was passed in May and signed into law by President Muhammadu Buhari in June to provide a moderate lift to growth in 2H18, noting that execution of the capex budget has improved, as the administration seeks to complete some roads, bridges and airport terminals ahead of the February 2019 elections.