Nigeria: Brighter but fragile growth outlook — Cordros Securities 1

Nigeria: Brighter but fragile growth outlook — Cordros Securities

Nigeria: Brighter but fragile growth outlook — Cordros Securities 2

ECONOMIC growth in Nigeria remains anaemic, hovering around 2.00 per cent in the last few quarters and trailing its pre-recession historical average of 4.80 per cent, Cordros Securities has said.

In its economic review for 2019 and outlook for 2020 tilted “Nigeria in 2020. At the Cliff’s Edge” Cordros Capital said: “In 2019, the economy strengthened by an average of 2.17 per cent YoY, riding the wave of strong performances from the non-oil sector (+1.99%) and a rebound in the oil sector (+4.07%). To start with, economic activities started on a strong footing, as GDP growth expanded by 2.10% y/y in the first quarter, on the heels of a robust performance from the non-oil sector (+2.47%), while the Oil sector (-1.64%) remained in a recession for the fifth consecutive quarter. As we had expected, a rebound in the oil sector and sustained aura in the non-oil sector underpinned the stronger economic expansion of +2.12% Year on Year YoY and +2.28% YoY in Q2-19 and third quarter, Q3-19, respectively.

“Over the Q4-19, we expect sustained growth in the oil sector (+6.28 YoY), mostly on account of a low base in the corresponding quarter in the prior year, as well as an improved crude production. Elsewhere, we expect higher growth in the Service and Agricultural to support the non-oil GDP growth of 2.06% YoY” the company added “Overall, we expect growth to settle at 2.36% and 2.21% in Q4-19 and 2019FY, respectively. Non-Oil Sector is Front Runner for 2020 growth. After a modest performance recorded in 2019, our growth forecast for 2020 is conservative, with our model suggesting limited upside in the oil sector, but a stronger non-oil sector growth. For the oil sector, the combination of (1) extension of OPEC’s crude oil production cut agreement, and (2) unfavourable high base from 2019 look set to put a cap on oil sector growth next year. Thus, our prognosis is that the non-oil sector will dictate the pace of growth over 2020. To be clear, we believe the FGN’s continued efforts to curb herders-farmers conflict would drive the agricultural sector back to its historical level. Meanwhile, the CBN’s push for higher credit to the private sector is expected to improve activities within the manufacturing space” Cordros stated.


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