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Nigeria’s Q1 GDP growth (2.98%) masks underlying structural problems

Nigeria’s GDP numbers showed a modest increase in growth. However, key sectors of the economy with strong linkages, such as manufacturing, agriculture, and trade, all slowed or contracted. The level of employment in these industries hints at a potential unemployment crisis ahead.

Nigeria’s Q1 GDP grew by 2.98%, which is 0.48% higher than the corresponding period in 2023 but slower than Q4’23 growth of 3.46%. Analysts had expected higher growth due to policy reforms, but only 14 out of 46 business activities expanded.

Structural defects and subsidy reduction

The numbers we are seeing are attributed to the lingering impact of structural defects that have not been addressed. The cumulative effect of these deficiencies is now manifesting itself in sub-optimal growth. Nigeria’s real GDP of 2.98% is much lower than the real potential GDP of 5.4% (EIU). Subsidy removal and a squeeze in income are pushing consumers to the brink. As consumers reduce their consumption, aggregate demand in the economy begins to fall, leading to a decline in GDP.

As we approach the first anniversary of the administration, we expect various fiscal announcements. This will include a stimulus package of approximately 1-2% of GDP. Whilst this might be modest in pure macroeconomic terms, it may help push growth up mildly.

In the link below, the FDC Think Tank analyses the GDP numbers for Q1’24 and its implications.

Enjoy your read!