Nigeria’s Gross Domestic Product (GDP) expanded by 2.31% year-on-year in real terms during the first quarter of 2023, marking a decrease of 1.21% points compared to the previous quarter’s 3.52% growth and a decline of 0.8% compared to the corresponding period in 2022, according to the latest Gross Domestic Product report released by the National Bureau of Statistics (NBS).

The slowdown in GDP growth rate has been attributed to the scarcity of the Nigerian currency, the naira, which persisted in the first quarter of the year due to the central bank’s steadfastness in implementing its naira swap policy. The policy led to a significant shortage of naira notes, adversely affecting businesses across the country that heavily rely on cash transactions. In March, the Supreme Court ruled against the policy, compelling the central bank to extend the deadline for the expiry of old notes to December 31st, 2023.

Analysis of GDP Data

The Services sector emerged as the primary driver of GDP growth in the first quarter of 2023, recording a robust growth rate of 4.35% and contributing 57.29% to the overall GDP. Conversely, the agriculture sector contracted by 0.9%, exhibiting lower performance compared to the 3.16% growth witnessed in the first quarter of 2022. Furthermore, although the industry sector improved its growth to 0.31% relative to the -6.81% recorded in the same quarter of the previous year, both agriculture and industry sectors contributed less to the aggregate GDP in the current quarter compared to the corresponding period in 2022.

Oil Sector Performance

The real growth rate of Nigeria’s oil sector stood at -4.21% (year-on-year) in Q1 2023, signifying an increase of 21.83% points when compared to the rate recorded in the corresponding quarter of 2022 (-26.04%). This growth also displayed a positive shift of 9.18% points compared to Q4 2022, which registered a growth rate of -13.38%. On a quarter-on-quarter basis, the oil sector experienced a growth rate of 20.68% in Q1 2023.

In terms of contribution to the total real GDP, the oil sector accounted for 6.21% in Q1 2023, slightly lower than the corresponding period of 2022 and the preceding quarter, where it accounted for 6.63% and 4.34%, respectively. Additionally, Nigeria achieved an average daily oil production of 1.51 million barrels per day (mbpd) in Q1 2023, surpassing the daily average production of 1.49mbpd recorded during the same quarter of 2022. Notably, this figure also exceeded the production volume of Q4 2022 (1.34 mbpd) by 0.17mbpd.

Non-Oil Sector Performance

The non-oil sector recorded a real growth rate of 2.77% during the first quarter of 2023, reflecting a decrease of 3.30% points compared to the rate achieved in the same quarter of 2022 and a decline of 1.67% points relative to the fourth quarter of 2022.

Positive GDP growth in the non-oil sector was primarily driven by Information and Communication (Telecommunication), Financial and Insurance (Financial Institutions), Trade, Manufacturing (Food, Beverage & Tobacco), Construction, and Transportation & Storage (Road Transport).

In real terms, the non-oil sector accounted for 93.79% of Nigeria’s GDP in the first quarter of 2023, marking a slight increase compared to the share recorded in the same quarter of 2022 (93.37%) but a decrease from the fourth quarter of 2022 (95.66%).

The latest GDP data indicates a moderation in Nigeria’s economic growth, primarily influenced by the scarcity of naira notes and the consequent impact on businesses. However, the Services sector and non-oil activities demonstrate resilience and contribute significantly to the nation’s overall GDP. As the effects of the naira swap policy subside, it remains to be seen how Nigeria’s economic performance will evolve in the coming quarters.