According to data released by the National Bureau of Statistics (NBS), the Nigerian economy demonstrated resilience in Q2 2024 as Real GDP grew by 3.19% year-on-year, exceeding the 2.51% and 2.98% growth rates in Q2 2023 and Q1 2024, respectively. The Oil sector’s strong performance was the linchpin of this growth, while the Non-Oil sector remained tepid.

The Oil sector sustained its upward trajectory for the third consecutive quarter, achieving a remarkable 10.15% year-on-year real GDP growth in Q2 2024. This marks a substantial recovery from the -13.43% contraction in Q2 2023, and nearly doubles the 5.70% growth recorded in Q1 2024. The sector contributed 5.70% to total GDP growth in Q2 2024 (Q2 2023: 5.34%; Q1 2024: 6.38%).

Macroeconomic headwinds, characterised by heightened interest rates environment, infrastructure vandalism, FX illiquidity and persistent inflationary pressures that stifles purchasing power and escalates production cost continued to weigh heavily on the Non-oil sector. This confluence of challenges culminated in a subdued year-on-year growth of 2.80% in Q2 2024, unchanged from Q1 2024 figures, and a decline from 3.58% in Q2 2023. The sector contributed 94.30% to total GDP growth in Q2 2024 (Q2 2023: 94.66%; Q1 2024: 93.62%).

Outlook

While we are not optimistic about the Oil sector achieving the ambitious target of 1.78mbpd in H2 2024, we expect improvement in the oil production in H2 2024.

On the Non-oil sector front, diverse trends emerge. We anticipate that the benefits of harvest season will bolster growth in the Agricultural sector, while the recent NCC’s directive for the reactivation of barred mobile numbers affected by the NIN-SIM verification exercise is also expected to positively impact the telecommunication subsector. However, the challenges of shrinking consumer disposable income, Naira depreciation, and elevated interest rates, casts a shadow over our overall growth expectation for the Non-oil sector.

In light of this, we project that the economic growth will be largely underpinned by the Oil sector’s performance, and we revise our we revise our projection for FY 2024 real GDP growth to close at 3.31% (previous: 3.20%).

Please follow the link “Q2 2024 GDP Report – Oil Sector’s Growth Masks Non-Oil Sector’s Tepid Performance” to view the whole report.