So far this year, Nigeria’s economy has encountered a multitude of challenges, ranging from a cash crunch at the beginning of the year to persistent high-interest rates and sky-bound inflation rates. These obstacles have had significant repercussions on the country’s economic performance, including its GDP.
According to the latest report by the National Bureau of Statistics, Nigeria’s Gross Domestic Product (GDP) grew by 2.31% (year-on-year) in real terms in the first quarter of 2023. This growth rate declined from 3.11% recorded in the first quarter of 2022, and 3.52% in the fourth quarter of 2022. The report suggests that the reduction in growth is attributed to the adverse effects of the cash crunch experienced during the first quarter of 2023.
The performance of the GDP in the first quarter of 2023 was driven mainly by the Services sector, which recorded a growth of 4.35% and contributed 57.29% to the aggregate GDP. The agriculture sector grew by -0.90%, lower than the growth of 3.16% recorded in the first quarter of 2022. Top contributing activities to real GDP in Q1 2023 were crop production, Trade, Telecommunications & Information Services, Crude Petroleum and Natural Gas, and Real Estate amongst others.
The first-quarter GDP data revealed several significant insights that warrant attention. Here are some key takeaways from the GDP report.
The oil sector
The Nigerian oil sector, a significant pillar of the nation’s economy, experienced notable developments in the first quarter of 2023. During this period, Nigeria achieved an average daily oil production of 1.51 million barrels per day (mbpd), representing a slight increase of 0.01mbpd compared to the previous year’s first quarter. Furthermore, this production volume surpassed the figure recorded in the fourth quarter of 2022 by 0.17mbpd, highlighting a positive trend in the sector’s performance.
The real growth of the oil sector was –4.21% (year-on-year) in Q1 2023, indicating an increase of 21.83% points relative to the rate recorded in the corresponding quarter of 2022 (-26.04%). Growth increased by 9.18% points when compared to Q4 2022 which was –13.38%. On a quarter-on-quarter basis, the oil sector recorded a growth rate of 20.68% in Q1 2023.
In terms of its contribution to the overall economy, the oil sector accounted for 6.21% of Nigeria’s total real Gross Domestic Product (GDP) in the first quarter of 2023. This figure represents a slight decline from the corresponding period of 2022 but demonstrates an improvement from the preceding quarter, where the sector’s contribution stood at 6.63% and 4.34% respectively.
Non-oil sector
In the first quarter of 2023, the non-oil sector of Nigeria’s economy demonstrated its resilience by recording a growth rate of 2.77% in real terms. While this growth is commendable, it represents a decrease of 3.30% points compared to the rate observed in the same quarter of the previous year. Additionally, it was 1.67% points lower than the growth rate recorded in the fourth quarter of 2022.
Progress in the sector was driven in the reference quarter mainly by ICT; Financial and Insurance (Financial Institutions); Trade; Manufacturing (Food, Beverage & Tobacco); Construction; and Transportation & Storage (Road Transport), accounting for positive GDP growth.
During the first quarter of 2023, the non-oil sector made a significant contribution to the nation’s GDP in real terms higher than the share recorded in the first quarter of 2022 which was 93.37% and lower than the fourth quarter of 2022 recorded as 95.66%.
Information & Communication
As before, the sector played a vital role in the country’s economy, and in the first quarter of 2023, it demonstrated positive growth and contribution to the overall Gross Domestic Product (GDP).
During the first quarter of 2023, the Information and Communication sector accounted for 17.47% of the total real GDP. This figure represents an increase from the same quarter of the previous year when the sector contributed 16.20% to the GDP. Furthermore, it surpasses the contribution recorded in the preceding quarter, which stood at 16.22%.
Finance and Insurance
In the first quarter of 2023, financial institutions accounted for a substantial 91.75% of the sector, while insurance represented 8.25% in real terms.
As a whole, the finance and insurance sector demonstrated strong growth in nominal terms, with a growth rate of 22.37% year-on-year. The financial institutions’ subsector experienced impressive growth, recording a growth rate of 25.99%. However, the Insurance subsector faced challenges, reflecting a decline of -7.25% in growth rate.
The sector also exhibited positive quarter-on-quarter growth, with a rate of 12.55%. This growth indicates the sector’s resilience and ability to adapt to changing economic conditions. Furthermore, the finance and insurance sector’s contribution to the nominal Gross Domestic Product (GDP) stood at 4.11% in the first quarter of 2023. This contribution marked an increase compared to the previous year when it accounted for 3.80% of the GDP. Moreover, it surpassed the contribution of 3.30% made in the preceding quarter.
A faltering agriculture sector
In the first quarter of 2023, the agricultural sector experienced a notable downturn in economic performance. The quarter-on-quarter growth rate stood at -28.83%, indicating a significant decline compared to the previous quarter.
The decline in the Agricultural sector’s growth rate raises concerns despite the finances (Anchor Borrowers’ Programme) invested in it by the government. In the first quarter of 2023, Agriculture contributed 19.63% to the country’s nominal Gross Domestic Product (GDP). However, this figure was lower than the rates recorded both in the first quarter of 2022 and the fourth quarter of 2022. In the corresponding period of 2022, Agriculture contributed 21.09% to the GDP, while in the fourth quarter of 2022, it accounted for a higher share at 24.90%.
The sector’s contribution to the overall GDP stood at 21.66% representing a decline from the contribution recorded in the same quarter of the previous year, where it accounted for 22.36% of the GDP. Additionally, it was lower than the significant contribution of 26.46% observed in the fourth quarter of 2022.
The decline in the growth rate and the reduced contribution of Agriculture to the overall GDP in the first quarter of 2023 may not be unrelated to the challenges such as adverse weather conditions, limited access to finance, and infrastructure constraints that afflict the sector.
