The NBS reports that in the three months to June 2013, real Gross Domestic Product (GDP) grew 6.18% on a year on year basis – 21bps slower than in corresponding period in 2012 and 33bps weaker than in the preceding quarter. As ever, oil GDP (which contributes ~14-15% to GDP) continues to post negative growth on account of the continued decline in oil production, with the NBS reporting that production averaged 2.11mbpd vs. 2.4mbpd over the same period in 2012. The spate of bunkering appears to have heightened just as in the first quarter of 2013 when oil production averaged 2.29mbpd. Furthermore, as the PIB remains stuck in the national assembly, no licensing rounds have been held or can be held to expand reserves and oil production ensuring that this weak trend in production is likely to continue for a while.
Non-oil GDP which has been the main driver of growth also slackened driven by weakness in Wholesale and Retail Trade (accounts for ~20% of GDP) which grew at its slowest pace in over a decade – 7.6%. This is possibly on account of insecurity issues up north which has resulted in atypical trade flow patterns on account of several border closures with neighbouring countries like Chad, Niger and Cameroon. In addition, the implementation of some trade restrictions on certain imports like rice and perhaps cement could have played a role in this weakening in trade.
It was not all gloom as agriculture (The biggest component of GDP) began to show signs of a recovery from the several shocks it faced over in 2012 as it surged 40bps from Q1 to 4.5% – 30bps higher than in the same period in 2012. This has positive ramifications for inflation which has surprised positively this year by remaining sub-9% over the peak of the lean season i.e July and August implying we could be in for much lower inflation prices with the onset of the harvest period in September.
On the overall, I believe Q3 will be stronger for non-oil and oil GDP should post a QoQ improvement as there haven’t been any reports of a new force majeure on oil pipelines in Q3 albeit it would still be weaker on a year on year basis given the stronger base of Q3 2012.
Figure 1: Quarterly trends in GDP Growth