The NBS has released the national accounts for Q4 2016 to show negative growth of -1.3% y/y (after -2.2% the previous quarter). The contraction of the economy thus extended to a fourth successive quarter, and amounted to -1.5% y/y for the full year. Our expectation was modest GDP growth in Q4 on the basis of some recovery in the non-oil economy with help from the usual, seasonal boost. This did not materialize, and the slump in real oil output was worse than we anticipated. That fall was slower than the previous quarter yet still in double digits (-12.4% y/y).
Oil’s share of real GDP declined to just 8.4% in 2016 and is now only the fifth largest in the economy: it is topped in descending order by agriculture, trade, information and communications, and manufacturing. Through its linkages across other sectors, however, the indirect oil economy may be as large as 40% of GDP.
The non-oil economy contracted by -0.3% y/y in Q4. Trade, which is the most reliable measure of economic activity across all income groups, shrank by -1.4% y/y.
The FGN has a major role to play in economic recovery on the fiscal side. Construction contracted for the sixth successive quarter, by 6.1% y/y, and stands to benefit from the planned acceleration in capital releases to spending ministries.
Sources: National Bureau of Statistics (NBS); FBNQuest Research
Looking ahead to the Q1 2017 data, the base effects for the oil sector are challenging. Crude production averaged 2.11 mbpd in Q1 2016 according to the NBS data. The non-oil economy remains fragile and household consumption soft. We should see a token return to positive territory for GDP as a whole.
