Calling the end of the recession

Although the national accounts for Q1 2017 are not due until late May, we have had some guidance from two prominent individuals. The statistician-general, Yemi Kale, insisted last week in an interview that “the numbers suggest things are improving”. He added that the figure would be close to last year’s, whether positive or negative”. (This was an apparent reference to the -0.4% y/y contraction in the economy in Q1 2016.) Kale highlighted improved oil production and factory output, along with farming and telecoms performance, in support of his case.

On Tuesday CBN Governor Emefiele told the local media that he saw the economy emerging from recession by the end of the second quarter, or latest the third. This less optimistic take than Kale’s was based on naira appreciation on the parallel market, reserves accumulation and the easing of inflationary pressures. 

An acute shortage of activity indicators complicates any attempt to make a call. For example, there are no worthwhile measures of manufacturing output, housing starts or retail sales. Further, there is no unified official data source for oil production.

Our own manufacturing PMI shows a neutral reading for February and a move into sound positive territory in March (52.8).

We are more bullish than the governor. At the very least, positive base effects from the oil economy should make the difference: oil production in Q2 and Q3 2016 was as low as 1.81 mbpd and 1.63 mbpd respectively.


Calling the end of the recession Sources: National Bureau of Statistics (NBS); FBNQuest Research

For the full year, the IMF has 0.8% y/y growth, S&P Global Ratings forecasts 1.5% and we expect 2.1%. The reform scenario in the FGN’s Economic Recovery and Growth Plan assumes 2.2% y/y.

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