Oil and gas again the worst performer

From the national accounts for Q4 2016 we today highlight the five worst performing sectors. We cover only those sectors accounting for at least 1% of GDP at constant basic prices. The data show agriculture expanding by 4.0% y/y, and industry and services contracting by -6.7% and -1.5% respectively. Industry (the secondary sector) was dragged down by the -12.4% y/y contraction in the oil and natural gas sector. Three of the five worst performers (real estate, construction and manufacturing) are struggling with soft demand across the economy.

The most telling evidence of the softness of the non-oil economy is that trade, the second largest sector of the economy, declined by -1.4% y/y. This was little changed from the previous quarter. Trade is the most reliable measure of demand across all income levels.

The FGN plans to compensate for the weakness of household demand by boosting its own capital spending to N2.24trn this year, compared with the provisional outturn of N850bn in 2016.  This target may prove challenging but the sizeable increase that we see this year should support construction as well as the cement segment of manufacturing.

The contraction in manufacturing slowed in Q4, with a minority of segments (notably textiles, apparel and footwear) posting positive growth. This could be evidence of a rise in import substitution.

Finance and insurance was the strongest performer in services, growing by 2.7% y/y.


Oil and gas again the worst performer Sources: National Bureau of Statistics (NBS); FBNQuest Research

The president’s 2017 budget speech to the National Assembly pledged to “maintain” spending on personnel at about N1.8trn. In contrast to capital expenditure, this is not supportive of consumption demand.

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