PricewaterhouseCoopers says Nigeria’s economy will recover fully in 2019 with GDP growing at 6.7 percent

• Anayo Ezugwu

PRICEWATERHOUSECOOPERS, PwC, has predicted that the economy of Nigeria[s will not recover fully until 2019. The PwC expects Nigeria’s real Gross Domestic Product, GDP, to attain full recovery by 2019, with growth moving closer to its long-term trend of 6.7 percent.

The company in its Nigeria Economic Alert for the month of September 2017, said despite the National Bureau of Statistics report that the economy has recovered by 0.55 percent in the second quarter its 2017, GDP forecast remains unchanged at 0.7 percent year-on-year. According to PwC, to attain this growth forecast, it estimated that real GDP will expand by 1.8 percent year-on-year in third quarter of 2017 and 1.1 percent year-on-year in fourth quarter of 2017.

“We think this is plausible, given our expectation of a strong harvest season and sustained forex liquidity, which should support a broad-based economic recovery. Risks to our forecast include a decline in oil price and production, and policy disruptions which could hamper investment flows to the economy.

“Based on the study conducted by Terrones et al (2009), which examined a sample of 122 business cycles in 21 advanced economies, an oil-induced recession, on average, lasts for about 4 quarters. After the economy bottoms, it could take about a year for real GDP to recover to pre-recession levels. Subsequently, the economy expands for a period, which could often exceed five years, depending on the structure of the economy and the reforms implemented.

“Following the economic contraction recorded in 1991, Nigeria’s economy recovered to pre-recession levels one year after, and experienced positive growth for another 24 years. Of course, this growth was fuelled by a mix of factors including the oil boom, a maturing political system, as well as accelerated reforms which opened up the economy for sustainable growth. Thus, we expect real GDP to attain full recovery by 2019, with growth moving closer to its long-term trend of 6.7 percent,” it said.

PwC stated that in second quarter of 2017, Nigeria’s economy returned to positive growth as real GDP grew 0.5 percent year-on-year after successive declines for five quarters. This recovery was supported by a strong rebound in the oil sector (8.8 percent of GDP), which expanded by 1.6 percent year-on-year (–15.6 percent year-on-year in first quarter of 2017). “The non-oil sector on the other hand was boosted by a strengthening of the broader manufacturing sector, reflecting the impact of improved foreign exchange liquidity. We note that the first quarter of 2017 real GDP growth was revised down to -0.9 percent year-on-year  (previous: -0.5 percent year-on-year ); a revision necessitated by lower than estimated oil production figures for March 2017 which dragged oil output lower.

“Agriculture grew at a slower pace for the fifth consecutive quarter, recording a growth of 3.0 percent year-on-year in second quarter of 2017 (first quarter of 2017: 3.4 percent and second quarter of 2016: 4.5 percent). This trend has been driven mainly by weaker output in the livestock and fishing sub-sectors, resulting from the scarcity of grains. In addition, we suspect the second quarter resurgence in insecurity in the North East might have negatively impacted crop production activities. This explains the trend in food inflation, which spiked to a seven-year high of 20.3 percent year-on-year in July 2017.

“The manufacturing sector expanded for the second consecutive quarter, although at a slower pace. Real growth increased by 0.6 percent year-on-year in second quarter of 2017, relative to -3.3 percent year-on-year a year earlier. Relative to first quarter of 2017, however, growth slowed from 1.3 percent year-on-year, a reflection of the performance of sector heavy weights, food, beverage and tobacco and cement which account for 54.0 percent of manufacturing GDP. Whilst the broader sector appears to have benefitted from the improved availability of forex.”

It suspected that the price increases implemented across most consumer companies in the course of the year might have impacted volumes. Nonetheless, quarterly data (second quarter of 2017: 1.0 percent quarter by quarter versus first quarter of 2017: -5.0 percent quarter by quarter) suggests the consumer recovery remains underway, albeit fragile.

 – Sept 15, 2017 @ 10:47 GMT |