GDP growth improves in Q2

GDP reading: GDP growth accelerated to 3.2% year on year in the second quarter, above the 3.0% expansion recorded in the first quarter. The print was in line with market expectations.

Drivers: The improvement was driven by stronger momentum in the oil sector, where growth rose to 10.1% from 5.7% in Q1. Meanwhile, growth in the non-oil sector matched Q1’s 2.8% as improvements in agriculture and construction offset deteriorations in manufacturing and services. The agricultural sector gained steam, growing 1.4% in Q2 (Q1: +0.2% yoy). Moreover, the construction sector rebounded, posting a 1.0% expansion in Q2 after contracting by 2.1% in Q1. On the flip side, manufacturing sector growth eased to 1.3% in Q2, following the 1.5% rise logged in the previous quarter. In addition, the services sector grew 3.8% in the second quarter, decelerating from the first quarter's 4.3% increase and marking the slowest growth since Q1 2021.

GDP outlook: Our panelists expect GDP growth to broadly match H1’s pace in H2. Rising output from the Dangote refinery will provide support. That said, tighter financing conditions and elevated inflation will hamper domestic demand. Moreover, the recent escalation in social turmoil could jeopardize ongoing economic reforms. A deterioration in the security situation of the oil-producing Niger Delta is an additional downside risk.

Panelist insight: Analysts at Fitch Solutions commented on the outlook: “We expect that economic growth will remain around the 3.0% mark in Q3 2024 and Q4. Oil production expanded by a robust 10.2% y-o-y in June-July—supported by production at the Madu Oil Field—indicating that the hydrocarbon sector will continue to support economic growth in H2. In addition, we expect that the start of petrol production at the Dangote Refinery in September will lower imports and thus support net exports in Q4 2024.”

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