GDP growth records joint-quickest expansion in nearly three years in Q3

Economy outpaces market expectations: GDP growth gathered steam to 3.5% year on year in the third quarter from 3.2% in the second quarter, marking the joint-fastest growth since Q4 2021. The reading surprised markets on the upside.

Services sector leads the improvement: The improvement was driven by stronger momentum in the non-oil sector, where growth rose to 3.4% in Q3 from Q2’s 2.8%. Looking at a sectoral breakdown, the services sector spearheaded the acceleration, growing 5.2% in the third quarter, picking up from the second quarter's 3.8% increase and marking the quickest growth since Q4 2022. Moreover, the construction sector grew 2.9% in Q3, improving from Q2’s 1.0%. Less positively, the agricultural sector lost steam, rising 1.1% in Q3 (Q2:+1.4% yoy). Additionally, manufacturing sector growth fell to 0.9% in Q3, marking the worst reading since Q3 2023 (Q2: +1.3% yoy). In contrast to the non-oil sector, in the all-important oil sector, growth decelerated to 5.2% in Q3 from 10.1% in Q2, marking the weakest reading in a year.

GDP growth to strengthen in 2025: Our Consensus is for the economy to lose some steam in Q4, as stubbornly elevated inflation and interest rates constrain activity. That said, GDP growth is seen strengthening in 2025 from 2024’s projection as price pressures cool and Dangote refinery increases output. Rising insecurity and slowing reform momentum are downside risks.

Panelist insight: Analysts at the EIU commented on the outlook: “From an estimated 3.2% in 2024, real GDP growth will strengthen in 2025-26 as the Dangote oil refinery ramps up production. The facility will displace fuel imports, and some output will be exported. In line with this, and with disinflation, interest-rate cuts and greater exchange-rate stability yielding the beginnings of firmer consumer and business confidence, we expect growth of 3.6% in 2025 and 3.5% in 2026.”

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