Q1 2013 GDP

Nigeria’s National Bureau of Statistics (NBS) released Q1 2013 GDP while back which showed that national domestic output grew 6.56% from the corresponding period in 2012 which is 0.22 percentage points higher than in Q1 2012.

Figure 1: Output growth rate


Source: NBS

The breakdowns provided reveal that oil GDP continued its pilloried performance by posting a 0.54% contraction i.e (-0.54%) no doubt on account of the several force majeures instituted by the oil companies operation during the period. Oil production averaged 2.29mbpd vs. 2.35 in Q1 2012 as Exxon Mobil, Shell and Agip had to stop exports along the 200kbpd Qua Iboe and Bonny streams amidst other disruptions to oil production. Note that Nigeria’s 2013 budget is premised on the assumption that oil production would be at 2.5mbpd.

Nigeria’s Oil price benchmark – the Bonny light behaved quite admirably during the period averaging $114.79/barrel (well above the $79/barrel in the budget) – implying that the declines in output on account of the disruptions to production had a much stronger effect on oil GDP growth. This trend of weakness in oil GDP has been steady since 2011 when bunkering became much bigger and resulted in oil contribution to GDP dropping to 14.75% from 15.8% in Q1 2012.

Figure 2: Crude Oil Production, exports and Prices


Source: CBN

Non-oil GDP growth slowed down to 7.89% from 8.14% in recorded in Q1 2012. At this point the mathematicians would have smelled a rat – if Q1 oil GDP was negative and non-oil GDP growth slowed, where did the 22 basis point increment in overall GDP come from? Well simple – Although oil GDP contracted 0.54%, last year in Q1, it contracted a whooping -2.52% again on account of sharp drops in oil production. Thus, the moderation in oil GDP contraction was where the gain in overall GDP came from i.e. the only reason our GDP grew was because certain people bunkered less which pretty much sums the ‘pleasant’ state of affairs.

On non-oil GDP, its contractions stemmed from weakness in its biggest component Agriculture which grew 4.14% as against 4.37% in Q1 2012 as farming activities are still reeling from the 2012 floods which destroyed farmlands, rural roads, irrigation systems, etc

Wholesale and Retail trade also slowed posting an 8.2% growth where it was 8.42% in 2012 partly due to the floods which destroyed several road networks but crucially a distortion in trade flows stemming from the insecurity in the North. The curfews and significant population displacement has resulted in all kinds of distortion to trade patterns, recently FMCG companies on the Nigerian Stock Exchange all reported slowdowns in sales from the North on account of the Boko Haram issue. Clearly this too is affecting growth.

The Q1 2013 GDP report was not all gloom – Manufacturing posted a big jump rising from 5.17% to 7.7%. well surely that ought to have eyebrows raised what manufacturing? Well a closer look reveals that in recent years the Cement industry has been revved up. Crucially last year marked the beginning of the end of cement importation with no cement import permits issued except to the Ibeto Group which has a curious court order giving it a right to import cement till 2017. The capacity expansions by Dangote, WAPCO and Ashaka cement producers are having a bigger impact on manufacturing GDP.

Outlook

The World Bank recently raised its outlook for Nigeria’s GDP growth rate to 6.7% largely on account of the recovery play – the weakened base of 2012 which was on account of one-off items: the partial subsidy removal which raised prices of Petrol by 49% and the floods which hit agriculture. Thus, if no floods again, non-oil GDP should improve given the scale of what the agriculture ministry is doing.

Nevertheless, the continued pace of oil theft in the Niger Delta should see oil GDP remain negative – albeit we have some oil projects coming up on stream in 2013 – Ehra North (ExxonMobil) and Oberan(EniAgip) and which could give Oil GDP a brief bump. Clearly the government has to tackle bunkering head on lest this trend continues. Furthermore, the continued lack of progress over the Petroleum Industry Bill will continue to create downside pressures on oil GDP and more importantly on fiscal revenues as with no clarity, few oil companies would be willing to bet on Nigeria’s oil sector. The fiscal terms on the PIB appear burdensome and the oil majors have resisted which is why we have not yet held any oil licensing round since 2008 to expand production and reserves. If this continues, longer term outlook for oil exploration in Nigeria is cloudy – hopefully the politicians would get their acts together and sort this mess.


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3 comments

  1. Ibezim Okehie · · Reply

    Hello, that’s an interesting read. The GDP jelled more with my first hand observations and experience, especially the bit about oil theft and agriculture. There must be many other people who didn’t feel that growth….or maybe it’s a de-facto contraction given the sequence and comparisons used to calculate the growth figure. I must still say that it’s safe to assume that a huge amount of economic activity in Nigeria is NOT captured by the NBS but the guesstimate is plausible. Overall the NBS is doing good work in their given environment.

    The cement story is beautiful and worthy of mention and is something the govt should learn from and apply to the petroleum sector. About Ibeto, I may be wrong, but the reverse integration policy awarded import licenses to sector participants who showed progress or willingness to invest in local manufacturing. Through no fault of his own, Ibeto’s efforts to invest have been stymied. The tragic story of Nigercem at Nkalagu has been in the press very recently.

    On retail, it would be interesting to see a regional breakout of the figures. Significant swathes of the country are in turmoil. I’ll check to see if they’re available. Well, there are all these modern shopping centers being build in secondary cities – Shoprite is expanding to Ilorin, Enugu and even Owerri will soon have one I think. A huge “hand carry import” consumer retail industry has also taken hold but I’m sure that’s not recorded in NBS stats???

    Your post did the SLIGHTEST possible mention of political factors in analyzing GDP growth. Given the outsize role played by the petroleum sector in the economy and how it affected this particular measure of GDP, we have to mention politics. And the real issue at stake is illustrated in Zimbabwe and Venezuela.

    It’s a question of perspective. Petro based GDP growth slowed because ordinary people increased their participation in taking crude oil. From personal observation, a lot of that STOLEN crude also entered the Nigerian economy and should still be counted as part of GDP.

    All you need to know about Nigeria and its internationalist system is given to us here in this GDP report from NBS. When govt and oil company partners take the crude via legal fiat and monetize it, the proceeds are counted as GDP. When an Ijaw, Akwa Ibom or Ukwa person in whose village the oil is located takes the crude and makes money from it, Nigeria counts it as a loss.

    Same as GDP was stable and growing in Zimbabwe when the farms were owned by those with legal title, but when they were taken over by a different set of people, their production didn’t count as GDP in the official or international statistics.

    Thanks for the post. The figures make sense and give some sense as to where the economy is headed. Apply the kind of reform done in cement, banking and telecoms to some segments of agric, petro and electricity and it’s clear there will be lots more official and internationally recognized Nigerian GDP growth ahead. That will mean greater job growth of a magnitude that more poor people can see and feel. That’s a good thing within the system we’ve accepted.

    Once again, thanks.

    1. on the cement issue, this piece > http://thenationonlineng.net/new/news/ibeto-cement-imports-just-1-5m-metric-tonnes-annually/ by the Nation provides a fair coverage of the events surrounding the issue.

      On trade, there are no such breakdowns provided unfortunately. Shoprite’s Nigeria expansion perhaps provides evidence of a growth in Middle-Class as companies follow the money put simply Shoprite wont be expanding if the Nigerian economy is getting worse and its people getting poorer.

      Politics is big and however its impact cannot be directly gleaned from GDP unless you examine measures of inequality like poverty. The NBS poverty report in 2010 perhaps is what would show it better. The economy is getting better but more people getting poorer meaning the growth isnt being re-distributed. Perhaps here its time to explain the difference between economic growth and development. Economic growth is increase in output development is economic growth that is equitably shared. So there you have it, the greater the inequality the more certain guys are getting rich on the growing economy.

      On the issue of stolen crude, it cannot be counted as GDP because no one can see it. Economists have a term for this – the Black economy. It cannot be seen or taxed hence its unmeasurable and its better of being left out. But i get your point – potentially Nigeria’s GDP growth is being underestimated.

      Cheers

  2. Ibezim Okehie · · Reply

    Wallesmit, that’s a good shorthand for development vs growth. Wow, makes sense and has profound implications for Nigeria. I like to tell people that a large fraction of our population doesn’t exist from an official perspective.

    I’ve often wondered if the tax burden in Nigeria is too low. Could explain the high growth, low development paradigm we have right now. Anyone trying to comply with all the taxes in Nigeria will likely say they are high…..hmmmm. And there’s plenty of “Black” taxes too. I know tax receipts are rising though. I know the govt charged or charges Dangote some kind of tax on cement exports…..yep, Nigeria EXPORTS cement 🙂 Maybe the mechanism used for transformation of tax revenue into development isn’t functioning optimally lol.

    So…higher taxes for higher GDP growth? Taxes are a big issue here.

    The continued expansion or actually the return of formal/large retail like Shoprite is a big tell that significant development is occurring. Taxes, taxes, taxes……hmmm.

    Thanks.

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