Decline in Economic Growth for Two Quarters Raises Concerns

expanded 1.2 per cent y-o-y, its slowest pace on record, based on quarterly data from 2010. The decline was on the heels of sharp moderation in two sub-sectors, crop production and livestock, suspected to be linked to recent restiveness prominent around North-central Nigeria. In recent times, insecurity due to herdsmen-farmer clashes has continued unabated in the middle-belt region, thus affecting crop and livestock outputs. Hence, growth in crop production (89.1 per cent of total real agriculture GDP) slowed to 1.4 per cent y-o-y in Q2 2018 from 3.4 per cent y-o-y in the previous quarter, the lowest on record, while the livestock sub-sector (7.5 per cent of total real agriculture GDP) remained in the negative territory, plunging deeper at -2.0 percent y-o-y, the weakest performance since Q4 2012.

“The current trend in agriculture is worrying, as growth remains weaker than long-term trend of c.5.0 per cent despite the federal government’s substantial support to the sector, most especially through the Central Bank of Nigeria (CBN’s) Anchor Borrowers’ Programme. We believe the ambitious plans for food security and import substitution will take a while to yield results. This is because the current intervention in agriculture is inadequate to drive desired growth, given unaddressed factors such as the huge productivity gap in agriculture, climate change impacts in the form of drought, parasites & diseases and a potential reduction in youth participation in agriculture as massive urbanisation and rural-urban migration intensifies.”

Afrinvest, however, warned that without effective strategies to lessen the impact of the downside risk factors, performance in agriculture will remain weak in the long-term.

Manufacturing

According to Afrinvest Research, the trend in the growth of the manufacturing sector remains volatile, as growth moderated to 0.7 per cent y-o-y in Q2 2018, from 3.4 per cent y-o-y in the preceding quarter.

This, the Renaissance Capital pointed out, was driven by tepid growth in sub-sectors such as cement (+3.8 per cent) and food, beverage & tobacco (+1.2 per cent) which recorded slower paces of growth, but cumulatively account for 54.6 per cent of total manufacturing real GDP. Notwithstanding, the impressive growth performance of the textile, apparel and footwear sub-sector – which accelerated at 2.7 per cent (the highest post-economic recession) – accounting for 22.1 per cent of total manufacturing real GDP, cushioned the effect.

“In our view, given the ease in FX challenges that affected the manufacturing sector’s growth between 2016 and early 2017, the slow momentum in the sector may be due to sluggish recovery in consumer spending.”

Services

After persisting in the negative territory for much of 2016 and 2017, the services sector staged a strong rebound in Q2 2018, growing at 2.1