Nigeria to Record its Largest Economic Decline in Q2– FSDH
- 5 Sectors accounted for 72% of GDP
- 8 out of 19 sectors contracted in Q1
- Share of service as percentage of GDP now 54%
- Industrial Sector contributes 24% to GDP in Q1
- At 22% Agriculture recorded lowest share to GDP
FSDH Merchant Bank Limited has stated that Nigeria will record its largest economic decline in the second quarter of 2020. The merchant bank made this known in its review of the recent gross domestic products report made available by the National Bureau of Statistics (NBS).
The Bureau reported a GDP growth of 1.87% for the nation in Q1 2020, the lowest growth rate since the third quarter of 2018.
Analysts told MarketForces that the GDP data is yet to capture the effects of the economic lockdown as a lagging indicator.
However, FSDH stated that the slow rate of economic expansion is a result of restriction of economic activities and social distancing policies.
These measures were implemented to control the spread of COVID-19 in Nigeria by the Federal Government, supported by the States.
The slowdown of growth rate reflected the shutdown of airports, cancellation of events and conferences and the sharp decline in crude oil price, FSDH stated.
MarketForces reported that the group had predicted a GDP growth of less than 2% in the first quarter of 2020.
“For Q2, the economy will contract significantly following shut down of non-essential economic activities in several States in April”, the Merchant Bank stated.
In Q1 2020, the oil sector expanded by 5.1%, a significant improvement relative to Q1 2019.
However, when compared with the previous quarter (6.4%), the sector expanded at a slow pace. Growth in the sector was triggered by an increase in crude oil production which averaged 2.07 million barrels per day in the quarter.
The non-Oil sector’s growth slowed to 1.5% in the quarter on the backdrop of COVID-19. In April, economic activities for non-essential items were restricted in major states such as Lagos, Ogun, Delta and the FCT.
The impact of these policies will be felt directly on key sectors such as Transportation, Manufacturing of non-essentials, Trade, Construction, etc.
“By this, we estimate that GDP for the second quarter of the year will experience significant decline”, FSDH stated.
High concentration of activities in 5-Sectors
In its review, FSDH explained that there was a high concentration of economic activities in five sectors. The firm stated among the three broad sectors, the Industrial sector, led by crude oil, recorded the highest growth rate of 2.3%.
Major industrial sub-sectors such as construction, manufacturing recorded a slower growth rate due to lockdown. Growth of Agriculture slowed to 2.2% in the quarter from 3.2% in Q1 2019 and 2.2% in the previous quarter due to seasonal factors and relatively lower demand/investments.
The services sector recorded the lowest growth in the quarter at 1.6% as a result of the government’s response to contain COVID-19.
The decline in growth was driven by the poor performance of major sub-sectors such as Trade, Real Estate, Entertainment and Accommodation & Food Services.
Read Also: Nigeria’s GDP grows by 1.94% in second quarter 2019
Nigeria to Record its Largest Economic Decline in Q2– FSDH
#Economic decline
