According to data from the National Bureau of Statistics, the oil economy declined by -11.8% y/y in Q2 ’22 compared with 6.6% y/y recorded in Q1 ’22. This decline can be largely attributed to production cuts on the back of oil theft and infrastructural deficits.
Turning to contribution to GDP, the oil sector accounted for 6.3% to the GDP compared with 6.6% recorded in the previous quarter. Meanwhile, the non-oil sector contributed 93.7% highlighting the sector as the major driver of the economy.
In February, oil prices exceeded USD100/b after Russia’s attack on Ukraine exacerbated concerns around disruptions to global energy supply. The Russia-Ukraine crisis as well as the sanctions against Russia impacted global oil supply. Furthermore, the US announced a ban on Russian oil on 08 March, which resulted in further upticks in oil prices.
Although oil prices had been volatile since the Russia-Ukrainian crisis began, prices began to dip below USD100/b in August. This was largely driven by concerns around a global economic downturn amid monetary policy tightening by central banks and covid-19 restrictions in China (the largest energy consumer).
Following the oil price decline, in its October ’22 meeting, OPEC unanimously agreed to adjust oil production downwards by 2mbpd in November ‘22. The adjustment was intended to spur a recovery in oil prices. Since the announcement, Brent crude price has increased by 2% to USD95.1/b.
OPEC data shows that Nigeria produced about 1.14mbpd of oil in September ’22 compared with 1.18mbpd recorded in the previous month. This is below the expected 1.6mbpd OPEC quota. Furthermore, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) noted that production from 13 out of 29 oil terminals declined between July to September.
The worst hit crude terminals include Bonny, Brass and Forcados.
In a bid to address the oil theft menace in the Niger Delta region, we understand that the FGN awarded a pipeline surveillance contract worth N48bn per annum run within the region in August. A few months after the contract was awarded, about 58 illegal connections were discovered in both Delta and Bayelsa states.
The FGN further disclosed that a probe mechanism has been setup to ensure culprits face the full extent of the law.
Despite developments regarding clampdowns on illegal oil refineries and bunkering, Nigeria may struggle to fully benefit from the global oil market. The latest commodity output report released by the World Bank (in October) disclosed that the benchmark crude oil price, Brent crude is expected to average USD92/b in 2023.
In an oil producing economy like Nigeria, oil price increases should reflect more revenue dividend as it is expected to enhance foreign exchange earnings and build reserves.
However, payment of petrol subsidy and low oil production occasioned by the activities of oil vandals have hampered oil revenue growth.
We understand that the effects of global warming have triggered the need for countries to shift attention to renewable energy sources. However, Nigeria’s oil economy should experience a face-lift on the back of the Dangote refinery which has an expected refining capacity of c.650,000 bpd.
Federal Government Halts Cooking Gas Export to Lower Local Prices
In a bid to stabilize domestic prices and meet rising demand for cooking gas within Nigeria, the Federal Government has announced a temporary halt on the exportation of Liquefied Petroleum Gas (LPG), commonly known as cooking gas.
This decision follows a significant surge in the cost of cooking gas, which has placed a strain on consumers across the country.
According to reports, the halt in LPG export aims to increase the availability of the commodity within Nigeria’s borders, thereby reducing its local price.
The move is part of broader efforts to address the challenges faced by consumers grappling with the high cost of living.
In recent years, the demand for cooking gas has steadily increased in Nigeria, driven by urbanization, population growth, and a shift towards cleaner energy sources.
However, despite being a major producer of LPG, Nigeria has struggled to meet its domestic demand due to insufficient local production and distribution infrastructure.
Data from the Nigerian Midstream Downstream Petroleum Regulatory Authority reveals that while the total consumption of cooking gas in Nigeria has been on the rise, the country has relied heavily on imports to bridge the supply gap.
The recent decision by the government underscores its commitment to prioritizing the domestic market and ensuring that Nigerians have access to affordable cooking gas.
Consumers have been grappling with escalating prices, with reports indicating a significant increase in the cost of refilling a 12.5kg cylinder of cooking gas in major cities like Abuja, Lagos, and Kano.
The decision to halt LPG exports signals a proactive measure by the government to mitigate the adverse effects of rising prices and alleviate the financial burden on households across the nation.
Manufacturing Sector Records 7.70% Quarter-on-Quarter Growth in Q4 2023
In the fourth quarter of 2023, Nigeria’s manufacturing sector grew by 7.70% year-on-year, according to the National Bureau of Statistics (NBS).
The surge in growth reflects a significant uptick from the preceding quarter and underscores the resilience of the manufacturing industry amid economic challenges.
This growth trajectory indicates positive momentum and signals potential opportunities for economic recovery and development.
The manufacturing sector, comprising thirteen key activities ranging from oil refining to motor vehicles and assembly, demonstrated notable dynamism across various subsectors.
This growth surge is attributed to increased production, enhanced operational efficiencies, and strategic investments across the manufacturing value chain.
Despite facing headwinds such as supply chain disruptions and regulatory uncertainties, the sector’s robust performance underscores its pivotal role in driving economic diversification, job creation, and industrialization efforts in Nigeria.
Moving forward, sustaining this growth momentum will require continued policy support, investment in infrastructure, and efforts to address key bottlenecks hindering the sector’s expansion.
By fostering an enabling business environment and promoting innovation and technology adoption, Nigeria’s manufacturing sector can further catalyze inclusive economic growth and contribute significantly to the nation’s development agenda.
Nigeria’s GDP Grows by 3.46% in Q4 2023, Driven by Services
Nigeria’s Gross Domestic Product (GDP) grew by 3.46% in the fourth quarter (Q4) of 2023 on the back of robust performance of the services sector, according to data released by the National Bureau of Statistics (NBS).
The GDP expansion though slightly lower than the 3.52% recorded in the same period of 2022, reflects a positive trajectory for the Nigerian economy amid ongoing challenges.
The growth rate surpassed the 2.54% recorded in the preceding quarter, indicating a rebound in economic activity.
The services sector emerged as the key driver of growth expanding by 3.98% and contributing 56.55% to the overall GDP.
This sector’s resilience underscores its pivotal role in Nigeria’s economic landscape, encompassing diverse industries such as telecommunications, finance, and real estate.
Also, the agriculture sector experienced growth, expanding by 2.10% compared to the same period in 2022.
Meanwhile, the industry sector recorded a notable improvement, growing by 3.86%, a stark contrast to the -0.94% contraction observed in the fourth quarter of 2022.
On an annual basis, Nigeria’s GDP expanded by 2.74% in 2023 compared to 3.10% in the previous year, reflecting sustained but moderated growth.
The positive trajectory in GDP growth reflects resilience in the face of various economic challenges.
However, sustaining and accelerating growth will require continued efforts to address structural bottlenecks, foster investment, and promote inclusive economic policies across sectors.
Nigeria’s Oil Sector Growth
During the fourth quarter of 2023, Nigeria’s oil sector posted a real growth rate of 12.11% year-on-year, signifying a significant improvement from previous periods.
This was driven by the surge in average daily oil production to 1.55 million barrels per day (mbpd), a positive shift in the sector’s performance.
Despite challenges such as global market fluctuations and production constraints, the oil sector contributed 4.70% to the nation’s total real GDP in Q4 2023.
Nigeria’s Non-Oil Sector
Nigeria’s non-oil sector sustained growth momentum, posting a 3.07% real growth rate in Q4 2023.
This growth was primarily attributed to key industries including finance, telecommunications, agriculture, manufacturing, and construction.
Accounting for 95.30% of the nation’s GDP in the same quarter, the non-oil sector continues to drive economic diversification efforts and reduce dependence on oil revenues.
Despite facing challenges, such as infrastructure deficits and regulatory bottlenecks, the sector’s resilience underscores its pivotal role in fostering sustainable economic development and inclusive growth agendas.
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