Cash Crunch Pushes GDP in Q1’23 To Lowest In 8 Quarters

As growth slows to 2.31% in Q1’23

Nigeria’s  Gross Domestic Product, GDP, growth rate fell to 2.31 per cent in the first quarter of 2023, Q1’23, the lowest in eight quarters. The decline also represented 80 basis points year-on-year, YOY, decline from the 3.11 percent recorded in Q1’22.

The decline in GDP growth reflects the severe impact of the cash crunch that constrained economic activities in the first quarter of this year. 

Disclosing these in its GDP report for Q1’23, the National Bureau of Statistics, NBS, said, “The reduction in growth is attributed to the adverse effects of the cash crunch experienced during the quarter’’.

Giving the breakdowns, the Bureau stated: ‘‘The performance of the GDP in the first quarter of 2023 was driven mainly by the services sectors, which recorded a growth of 4.35 percent and contributed 57. 29 percent to the aggregate GDP.

“The Oil sector contributed 6.21 percent to the total real GDP in Q1’23 down from the figure recorded in the corresponding period of 2022 and up from the preceding quarter, where it contributed 6.63 percent and 4.34 percent respectively.”

However, the non-oil sector grew QoQ  by 2.77 percent in real terms in Q1’23, down by 1.67 percentage points from 4.44 percent in Q4’22.

According to NBS, “In real terms the non-oil sector contributed 93.79 per cent to the nation’s GDP in Q1’23, higher than the share recorded in Q1’22 which was 93.37 percent and lower than Q4’22 recorded as 95.66 percent.”

Commenting on the development, analysts at CardinalStone Research said, ‘‘this outcome is consistent with its projection as well as the indications provided by high-frequency data, such as the Purchasing Managers’ Index (PMI) and business confidence surveys, which pointed to a significant contraction in economic activity during the review period.”

They however projected that, “Economic activities will likely show signs of recovery in the second quarter, aided by improved Naira availability and continued recovery in crude oil production. In particular, we see legroom for improvement in the agriculture and manufacturing sectors, with a positive pass-through to the non-oil GDP.”

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