The race is on for two of Africa’s largest economies. While Nigeria’s GDP in the second quarters of 2019 slowed by 0.16%, South Africa’s GDP expanded by 3.1% in second quarter.
Nigeria’s GDP Falls To 1.94% From 2.10% Recorded In First Quarter, 2019
Nigeria appears to be making progress here, compared to what the situation was this time last year. Figures from Nigeria’s National Bureau of Statistics, the country’s central data center indicate that Nigeria’s Gross Domestic Product (GDP) grew by 1.94% in the second quarter of 2019 compared to the second quarter of 2018, which recorded a growth of 1.50%. Compared to the time last year, this just represents a growth of an increase by 0.44% points.
However, the sad part would remain that compared to the GDP earlier this year, the GDP lost 0.16% points. This is because the GDP recorded in the first quarter of 2019 was 2.10%, whereas the current figure is 1.94%, a decrease of 0.16% points.
In simple terms, the common rationalisation would be that Nigeria’s economy was better before and during Nigeria’s national election, but has steadily declined after the elections.
Here Is All You Need To Know
- During the quarter, which ran from April 1, 2019 to June 30 2019, Nigeria’s aggregate GDP stood at N34,944,151.61 trillion in nominal terms. This figure represents an increase of 13.83% over the performance in the second quarter of 2018 and 9.8% over the preceding quarter.
- The performance observed in Q2 2019 follows an equally strong first quarter performance, and was likely aided by stability in oil output as well as the successful political transition.
- Overall, a total of 15 activities grew faster in Q2 2019 relative to last year, while 13 activities had higher growth rates relative to the preceding quarter.
- On a half year basis, real growth in the first half of 2019 stood at 2.02%, higher than in 2018 which was 1.69%.
- Quarter on quarter, real GDP increased by 2.85% compared to a decline of –13.69% in the preceding period. For better clarity, the Nigerian economy has been classified broadly into the oil and nonoil sectors.
The Oil Sector
In Q2 2019, Nigeria recorded average daily oil production of 1.98million barrels per day (mbpd), or 7.6% higher than the daily average production of 1.84mbpd recorded in the same quarter of 2018 but slightly less than output recorded in Q1 2019 (1.99mbpd-revised from 1.96 mbpd).
The oil sector posted a real growth rate of 5.15% (year-on-year) in Q2 2019, representing a 9.10% points increase relative to the rate recorded in the corresponding quarter of 2018. It also indicates an increase of 6.61% points when compared to Q1 2019(revised). Quarter-on-Quarter, the oil sector recorded a growth rate of –1.55% in Q2 2019. The sector contributed 8.82% to total real GDP in Q2 2019, up from levels recorded in the corresponding period of 2018 but down compared to the preceding quarter.
The Non-Oil Sector
The non-oil sector grew by 1.64% in real terms during the reference quarter. This was –0.40% points lower than recorded in the same quarter of 2018, and -0.83% point lower than the first quarter of 2019. During the quarter, the sector was driven mainly by Information and communication, Mining and Quarrying, Agriculture, Transportation and Storage, as well as Other Services. In real terms, the Non-Oil sector contributed 91.18% to the nation’s GDP, lower than the share recorded in the second quarter of 2018 (91.45%) but higher than the first quarter of 2019 (90.78%)
Deductions From The Report
- From the report, crop production added two times more to the GDP than the oil sector, at 17.02% against 8.59%.
- This is closely followed by trade at 15.36%, and Telecommunications & Information Services at 10.82%. Other notable sectors include real estate at 6.36% and construction at 6.87%.
- Overall, the agricultural sector declined from 3.17% in the first quarter to 1.79% in the second quarter. This is the most striking decline because this would be the lowest decline since September 2018, despite Nigeria’s claim at food sufficiency and recent ban credit for importers of milk and other products.
- The industrial sector is the only sector that saw real growth in GDP with the report indicating a rise from 0.42% in the first quarter of 2019 to 2.1% in the second quarter of 2019.
- The services sector, which is the largest contribution to the GDP in 2018 (at 52.63%) fell to 1.94% in the second quarter from 1.94% in the first quarter. The services sector include banking, insurance etc.
South Africa GDP expands 3.1% in second quarter
South Africa avoided a second recession in two years, with the economy growing by 3.1% in the three months to end-June, according to Stats SA.
This is much stronger than expected: A Reuters poll of economists had forecast growth of 2.4%.
SA’s economy shrank in the first quarter after more than 270 hours of load shedding, weak investment levels, a gold mining strike and a weak grape harvest.
In the second quarter, the mining sector rebounded with growth of 14.4% — contributing a full 1.0 percentage point to GDP growth. This was thanks to the end of strikes at gold mines, but also due to a major rally in metal prices. Gold is currently trading at its highest level in six years, while platinum jumped from below $800/oz in June to above $930 currently.
Finance, real estate and business services increased by 4.1% in the second quarter. Trade, catering and accommodation increased 3.9% and general government services increased 3.4%.
The agriculture, forestry and fishing sector continued to shrink, however, and in the second quarter was 4.2% smaller than in the first. Construction was down 1.6%.
The economy was still only 0.9% bigger in the second quarter of 2019 than a year before. On Tuesday, Stats SA revised the first-quarter GDP number down from -3.2% to -3.1%.
Ahead of the release of the data on Tuesday morning, economists expected a “technical rebound” following the end of load shedding.
While SA avoided a recession, the outlook for the economy remains bleak. Investment levels remain subdued, and businesses are struggling. The latest Absa Purchasing Manager’s Index (PMI) data shows weaker levels of private sector activity, and a grim outlook on future business conditions. Also, South Africa recorded a shock R2.88bn trade deficit for July as imports exceed exports, the South African Revenue Service reported last week.
Accordingly, the latest growth number may not rule out a rate cut when the monetary policy committee meets from September 17 to 19.
In July, the committee cut the benchmark repo rate by 25 basis points to 6.5% from 6.75% — the first cut since March 2018.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.