KPMG Flashnotes - Issue 7

Cash Crunch & Dysfunctional Economic Structure Slows Growth in Q1 2023

Highlights

• Real GDP in Nigeria rose by 2.31%, year on year in the first quarter of 2023, considerably slower than 3.52% recorded in Q4 2022 and 3.11% in Q1 2022 with agriculture contracting for the first time since the 1987, industry continuing its contractionary trend and services driving growth.
• Continuous slow and fragile growth was due to the dysfunctional economic structure where oil determines 62% of the economy directly and indirectly and worsened by the naira redesign induced cash crunch in Q1 2023.
• GDP is expected to remain sluggish and fragile for the rest of the year. We are revising our 2023 annual GDP growth forecast down from 3.0% to 2.85% for 2023

Event

Real Gross Domestic product (GDP) in Nigeria rose by 2.31%, year on year in the first quarter of 2023, considerably slower than 3.52% recorded in Q4 2022 and 3.11% in Q1 2022. Growth was driven by the services sector, which grew by 4.35%. The agricultural sector recorded its first contraction in over several decades, contracting by-0.90%, compared to 2.05% in Q4 2022 and 3.16% in Q1 2022. Industry, which includes manufacturing, mining, and quarrying, electricity production, water supply and construction, reversed its seven-quarter long contraction growing by 0.31% in Q1 2023, compared to -0.94% in Q4 2022 and -6.81% in Q1 2022. Accordingly, the non-oil grew by 2.77% in Q1 2023, compared to 4.84% in Q4 2022 and 6.08% in Q1 2022, while the oil sector, which has contracted since Q1 2020, further declined by -4.21% in Q1 2023 compared to -13.38% in Q4 2022 and -26.04% in Q1 2023.