Local Economy Up 1.81% amid Higher Foreign Direct Investment inflows in Q3 2018…

Nigerian Economy And Oil In Niger Delta And Port Harcourt...A street vendor helps a customer refuel his motorcycle with petrol sold in plastic bottles at a roadside store in Port Harcourt, Nigeria, on Wednesday, Jan. 13, 2016. With his security forces engaged in fighting Boko Haram's Islamist insurgency in the north, President Muhammadu Buhari can't afford renewed rebellion in the delta. Photographer: George Osodi/Bloomberg

Nigeria’s real Gross Domestic Product (GDP) report, released during the week, showed that the local economy grew year-on-year (y-o-y) by 1.81% to N18.08 trillion in Q3 2018, faster than
1.50% growth to N16.58 trillion recorded in Q2 2018. However, the growth rate was still slower than the 1.95% registered in Q1 2018. The non-oil sector accounted for the increased GDP number as it grew y-o-y by 2.32% to N16.38
trillion. This was partly attributed to the double-digit growth,12.09%, in information & communication sector to N1.91 trillion (of which telecoms which accounts for eighty per cent of the sector rose by 14.97%). In addition, the trade sector rebounded by 0.98% to N2.86% (from a 2.14% decline in the Q2 2018) while the agric sector expanded by 1.91% to N5.29 trillion in Q3 2018. Conversely, Oil and Gas sector further contracted y-o-y by 2.91% to N1.69 trillion in Q3 2018 despite quarterly increases in both average crude oil price and production. Much of the outstanding 9.05% quarter on quarter (q-o-q) GDP growth was propelled by oil sector which rose by 19.64%.
In a related development, Nigeria’s capital importation declined significantly by 48.21%, quarter-on-quarter, to USD2.86 billion in Q3 2018 (and on a yearly basis by 31.12%). A breakdown of the Q3 2018 capital imports showed that Foreign Portfolio Investments (FPI) accounted for 60.35% but nosedived q-o-q by 58.17% to USD1.72 billion.
Other investments (mainly comprised of Foreign Loans and other claims) which constituted 21.07% also fell q-
o-q by 46.90% to USD0.60 billion. However, Foreign Direct Investments (FDI) which constituted 18.58%
registered a sharp q-o-q increase of 103.03% to USD0.53 billion. A more detailed analysis revealed that capital
inflows from Equities FPIs moderated by 62.37% q-o-q (and 79.58% y-o-y) to USD0.39 billion in Q3 2018; while
inflows by Bonds FPIs plunged by 90.63% q-o-q (and y-o-y by 67.54%) to USD0.37 billion. Similarly, investment
inflows by FPIs in Money market instruments tanked by 51.66% q-o-q (but rose by 79.34% y-o-y) to USD1.29
billion. Foreign Loans also dipped by 49.96% q-o-q (and declined by 41.33% y-o-y) to USD0.56 billion in Q3
2018. A breakdown of capital imports by sector showed that investments in shares accounted for 58.41% or
USD1.67 billion but fell by 39.26% y-o-y (as well as 59.24% q-o-q). Other sectors which received relatively large
inflows include: financing which accounted for 13.01% of total capital imports and banking which accounted for
10.14% of total capital imports. According to the report, the highest inflow worth USD0.91 billion was from
United States (fell from USD1.22 billion). Following were inflows from the United Kingdom and South Africa
worth USD0.87 billion (fell from USD1.78 billion) and USD0.15 billion (fell from USD0.40 billion) respectively.
Meanwhile, inflation rate for the month of November 2018, as reported by NBS, resumed its upward movement
as it marginally climbed by 0.02% to 11.28%.
The improved 39.56% q-o-q growth in agricultural sector, despite flooding and attacks on farmers, 15% annual
growth in telecoms, boost in manufacturing and 351.23% y-o-y growth in FDI also suggest greater diversification
of the economy. We expect further growth in Q4 2018 given ongoing electioneering and year-end spending
activities as well as greater business and consumer confidence levels. However, Nigeria still needs to do more to
facilitate its ease of doing business as well as improve on its corruption perception in order to attract more
investments in the real sector and further grow the local economy as the country’s GDP per capita continues to
fall amid relatively faster population growth.

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.