Nigeria Economic Growth Picks Up as Oil and Factory Output Rise
Nigeria’s economic growth quickened in the first quarter as oil output started to recover and manufacturing production increased for the first time in a year.
Gross domestic product in the continent’s biggest oil producer expanded 0.5% in the three months through March from a year earlier, the Abuja-based National Bureau of Statistics said in a report published on Twitter on Sunday. That compares with 0.11% growth in the fourth quarter.
The median of three economists’ estimates in a Bloomberg survey was for an increase of 0.9%. The slow pickup in growth could reinforce central bank Governor Godwin Emefiele’s view that it’s still too early to increase the key interest rate from 11.5%.
Emefiele has said the monetary policy committee can only shift to fighting inflation that’s at an almost four-year high once the economy’s recovery from last year’s recession gains some traction. The MPC starts a two-day meeting on Monday and Emefiele will announce the outcome of the deliberations on Tuesday.
Bloomberg Economics says that they still expect a modest rebound this year, with GDP on track to recover by more than 2%. Inflation is also expected to remain above target. However, they don’t expect the Central Bank of Nigeria to hike rates until later in the year, when it is confident in the strength of the recovery.
Crude output rose to 1.72 million barrels per day in the first quarter from 1.56 million in the last quarter of 2020. But production is still below what it was before the coronavirus-linked lockdowns decimated demand and prices fell. Oil GDP contracted by 2.2% compared with a drop of 19.8% in the previous three months.
While oil contributes less than 10% of the country’s GDP, it’s a key driver of growth and provides most of the hard currency needed to power other industries and finance the government.
The non-oil economy expanded by 0.79% from a year earlier, picking up pace with manufacturing growing 3.4% and telecommunications increasing 7.7%.
Inflation unexpectedly eased in April for the first time in nearly two years, but at 18.1% it’s still double the top of the central bank’s target range. The rate has remained high even with economic underperformance since the oil crash of 2014. GDP could grow 2.5% this year and 2.3% in 2022, according to the International Monetary Fund.
“The MPC will be emboldened to keep monetary policy rate steady given the lower inflation” and positive growth number, said Gbolahan Taiwo, an economist with Stanbic IBTC Bank in Lagos.