Recent data from the National Bureau of Statistics (NBS) reveals that Nigeria’s domestic economy continued on its growth trajectory, with real GDP expanding by 2.54% year-on-year in Q3-23, a slight uptick from the previous quarter’s 2.51% year-on-year growth. The analysis of the data indicates a notable moderation in the decline of the oil sector, thanks to increased crude oil production volumes, while the non-oil sector maintained positive growth, albeit at a more restrained pace due to ongoing challenges related to government reform initiatives.
The oil sector contracted by 0.85% year-on-year, a significant improvement from the previous quarter’s 13.43% year-on-year decline, attributed to higher crude oil production volumes of 1.43 million barrels per day (mb/d) compared to the second quarter’s 1.39 mb/d and the first quarter’s 1.21 mb/d. Conversely, the non-oil sector exhibited a growth rate of 2.75% year-on-year, slightly lower than the previous quarter’s 2.75% year-on-year, with sub-sectors such as Trade, Agriculture, and Manufacturing experiencing a slowdown, while Finance & insurance recorded a relative expansion of 28.21% year-on-year.
Looking ahead, projections anticipate crude oil production settling at 1.41 mb/d in Q4-23, translating to a 14.93% year-on-year increase in oil GDP. Additionally, the non-oil sector is expected to grow at a rate of 2.21% year-on-year in Q4-23, aligning with growth expectations across the Services, Manufacturing, and Agriculture sectors. The overall growth forecast for Q4-23 is expected to be 2.76% year-on-year, leading to a downward revision of the 2023 growth forecast to 2.62% year-on-year.
In a related development, the Federation Accounts Allocation Committee (FAAC) disbursed NGN906.96 billion to the three tiers of government in November, a marginal increase of 0.4% month-on-month from October’s NGN903.48 billion. This disbursement, which represents 67.4% of the total revenue generated in the month, highlights a slight uptick in revenue, largely attributed to increased receipts from import Duty, Petroleum Profit Tax (PPT), Value Added Tax (VAT), CET Levies, and Electronic Money Transfer Levy (EMTL).
Despite challenges in certain revenue streams such as Excise Duties, Companies Income Tax (CIT), and Oil & Gas royalties, the near-term outlook suggests that the currency depreciation accompanying the FX market liberalization will continue to support oil revenue in naira terms. However, maintaining optimism in non-oil revenue sources remains crucial, supported by sustained economic activities and the impact of the 2022 Finance Act provisions.
