The non-oil sector of the economy is expected to grow by 3.34 percent in first quarter of 2022.
A report made available to The Point by Cordros Capital Limited indicated that the growth momentum in the non-oil sector of the economy will be maintained, albeit slowly, as the impact of base effects from the prior year and government stimulus packages dissipate.
The non-oil sector remains the predominant driver of the growth in the broad economy. Specifically, the sector grew by 4.73 percent year-on-year (y/y) in Q4-21, albeit slower than the growth recorded in Q3-21 (5.44% y/y) due to the fading impact of the low base from the prior year.
Agriculture, according to the report, is expected drive growth in the non-oil domain in the first quarter period of the year as the planting season is hoped to weigh on the agricultural sector’s growth amidst the persistent securities challenges in the food-producing regions.
“That said, sustained government intervention facilities for farmers are expected to support the sector’s growth. On a balance of factors, we estimate that the agriculture sector will grow by 3.19 percent y/y in Q1-22,” analysts disclosed.
In the Services sector, the ICT, Finance & Insurance, and Trade sub-sectors are tipped to remain the key drivers of activities. “However, we project a slower growth for the ICT sub-sector, given the stringent requirements needed to obtain new SIM cards. Aside from that, we believe the ability of the commercial banks to create risky assets would improve as macroeconomic conditions continue to strengthen. That said, the Trade sub-sector is expected to remain a key beneficiary of the impact of the favourable base from the preceding year. Overall, we expect the service sector to grow by 4.04 percent y/y.”
The Manufacturing sector was a key beneficiary of the CBN’s targeted interventions to mitigate the impact of the COVID-19 pandemic on the economy.
Accordingly, the sector witnessed the lagging effect of stimulus packages as it thrived in 2021FY (3.35% y/y vs 2020FY: -2.75% y/y). Therefore, it is expected that the sector’s growth will slow from Q1-22 after the initial post-COVID boost in 2021FY. “Besides, we believe FX liquidity constraints will continue to affect the sector’s performance amidst improved domestic demand.”
Cordros Capital further disclosed that “Overall, we forecast a 2.05 percent y/y growth in the manufacturing sector in Q1-22. Having factored in the upside and downside risks, we have revised our estimates for Q1-22 and 2022FY growth upwards to 2.81 percent y/y (Previously: 2.09% y/y) and 2.92% y/y (Previously: 2.65% y/y), respectively.”
Meanwhile, given that the oil sector’s challenges involve low investment level and infrastructural dearth, it is expected that its performance will remain lethargic over the short term. “Accordingly, we expect Nigeria’s crude oil production to continue to fall below the threshold stipulated by the OPEC+ agreement (March 2022 required production: 1.72mb/d). Consequently, we expect crude oil production, including condensates, to print 1.58 mb/d in Q1-22, translating to a negative growth estimate of 8.14% y/y,” the report hinted.
