Economy
Nigeria Sets to Exit Recession in Q2
By Cordros Research
Last week, the National Bureau of Statistics (NBS) released Nigeria’s Gross Domestic Product (GDP) report for the first three months of 2017. The report showed that during the reference period, the economy contracted by 0.52 percent y/y (in real terms), 77 bps lower than Bloomberg’s compiled median estimate of 0.25 percent.
Having declined throughout 2016, the contraction in the first quarter of 2017 extends the country’s recessionary trend, and marks the fifth successive quarter of negative output growth rate.
Compared to the rate recorded in Q4-2016 (revised to -1.73 percent from -1.30 percent), Q1-2017 GDP growth rate is ahead by 121 bps, and also higher by 15 bps relative to the corresponding quarter of 2016 (revised to -0.67% from -0.36 percent). On a quarter-on-quarter basis, real GDP growth was -12.92 percent.
The slowdown in the rate of output contraction during the review period is attributable to the rebound in the non-oil sector–supported by sustained growth in Agriculture (3.39 percent y/y), modest rebound in Manufacturing (1.4 percent y/y), and tempered contraction in Services (-0.3 percent y/y vs. 1.6 percent y/y and 1.1 percent y/y respectively in Q4 and Q3-2016).
Suffice to say that the economy would have performed better, save for the significant drag from the oil sector (-11.64 percent y/y) which has remained in the negative growth region for six straight quarters.
The Oil Sector – Still Pressured
The oil sector extended contraction to the sixth consecutive quarter, recording a negative growth of 11.64 percent (vs. -17.70 percent in Q4-2016 and -4.81 percent in Q1-2016). Output from the sector continued to reflect constrained crude oil production, a fallout of the effects of series of militants’ attacks on crude oil and gas installations for the most of 2016.
For insight, the Forcados terminal (c.0.3mbpd) remained under force majeure during the three months period, while production from Bonga (c.0.2mbpd) was suspended in March due to the Turnaround Maintenance (TAM) carried out at the oil field by Shell Nigeria Exploration and Production Company (SNEPCo).
Specifically, the Statistics office estimated crude oil production during the review period to be 1.83mbpd. While this was an improvement over the 1.76mbpd achieved in the final quarter of 2016, it came in well-below both the 2.05mbpd recorded in the corresponding quarter of 2016 and the 2.2mbpd contained in the 2017 appropriation bill.
In contrast to the disappointing pattern in Q4-2016, the increased daily average oil production in Q1-2017 resulted in a growth of 14.86 percent q/q (compared to -9.1 percent q/q in Q4-2016) in the sector.
Noteworthy, the NBS’ reported domestic crude oil production (March 2017 figure is an estimate and is therefore subject to revisions) for the reference period varied with OPEC’s estimates based on direct communication (1.41mbpd) and secondary sources (1.55mbpd)
The Non-oil Sector Rebounds Modestly
The non-oil sector exited the negative growth region it retreated to in the last three months of 2016, growing by 0.72 percent y/y in Q1-2017 (compared to -0.33 percent y/y in Q4-2016 and -0.18 percent y/y in the corresponding quarter of 2016).
Output growth in this sector was supported by activities in the following subsectors: agriculture (particularly crop production), manufacturing, information and communication, transportation, and other services.
Indeed, this subdued the impact of the negative growth, albeit at a slower pace – recorded in Services (accounting for c.64 percent of the economy). On quarterly basis, the non-oil sector declined 14.92 percent, after growing by 5.27 percent q/q in Q4-2016.
Agriculture Fires On
Real growth in the agriculture sector remained positive, coming in at 3.39 percent y/y, 30 bps ahead of the 3.69 percent recorded in the equivalent quarter of 2016, albeit 65 bps below Q4-2016’s 4.03 percent.
Quarter-on-quarter, the sector contracted 27.38 percent (vs. 7.4 percent q/q in Q4-2016). Growth in the agriculture sector, during the review period, was limited by a 3 percent slowdown (from 4 percent in the final quarter of 2016) in Crop Production – which accounted for c.87 percent of the total output from the sector during the period.
Clearly, the sustained growth in this sector further reflected the knockon effect of renewed government commitment – in its diversification campaign – to the sector, evident in increased funding and support in the form of improved supply of seedlings, insecticides, and fertilizers. Particularly, the FGN halved fertilizer price during the review period.
It bears noting that the Central Bank of Nigeria’s Anchor Borrowers’ Programme (ABP) has significantly improved access to agric credit, coupled with notable gains from the Agricultural Credit Guarantee Scheme Fund (ACGSF).
Still on the impact of government policy, area planted has increased on the back of prevailing import restriction on certain agricultural products, which has heralded massive import substitution (amid currency weakness) and backward integration.
Manufacturing: Base Effect and Forex Liquidity to the Rescue
The manufacturing sector rebounded, exiting a four-quarter negative growth spree by recording real GDP growth of 1.36 percent y/y in the reference period, 836 bps higher than the -7.0 percent posted in Q1-2016, and 390 bps higher than Q4-2016’s -2.54 percent y/y.
Quarter-on-quarter, growth was negative 6.21 percent. The improvement in this sector, apart from (1) the favourable base effect, (2) relative step-up in power generation, and (3) possible gains from improved forex liquidity, following the apex bank’s renewed commitment in the form of frequent interventions, was driven by growth in Food, Beverage & Tobacco (4.07 percent y/y, compared to -2.7 percent y/y in Q4-2016) – the biggest component of the manufacturing sector (c.44 percent) – also reflective of the strong start to the year in the performance of top listed FMCG companies including NB, NESTLE, and DANGSUGAR.
Recording its second consecutive positive growth (after exiting recession in Q4-2016: 1.08 percent y/y) of 1.17 percent y/y, Textile, Apparel & Footwear – accounting for c.23 percent of manufacturing – also lifted the broad manufacturing sector.
Also positive for the sector was a rebound (following negative growth in all quarters of 2016) in Cement – the third largest component (c.9 percent) of manufacturing – at 1.83 percent y/y. The modest growth in Cement speaks to the fact that volume growth in the subsector remained tepid, largely constrained by price increase actions taken by cement producers, which consequently restrained private demand (corroborated by a decline in Real Estate: -3.10 percent y/y) – accounting for the largest proportion of domestic consumption. Suffice to say that growth in the subsector was partly boosted by an extension of the tenure of the 2016 budget’s capital spending projects until 5th May, 2017, allowing for an increased spend during the review period.
Services Coming Out of the Woods, Gradually
The services sector remained pressured, contracting by 0.3 percent y/y (vs. 1.6 percent y/y in Q4-2016), extending the sector’s decline to the fourth successive quarter. The slower pace of contraction was on the back of sector-wide growth as shown in Information and Communication (2.9 percent y/y), Transportation & Storage (10.5 percent y/y), Financial & Insurance (0.7 percent y/y), and Other Services (1.7 percent y/y).
The gain from the aforementioned subsectors (among others) was however subdued by declines in Trade (3.1 percent y/y) and Real Estate (3.1 percent y/y) – both collectively accounting for c.42 percent and c.27 percent respectively of the Services sector and overall economy. The negative growth in Real Estate is consistent with lingering low demand for properties, especially for non-residential and prime residential buildings, while Trade suffered amid naira exchange rate depreciation, the FGN’s import substitution policies, and lastly, the highly inflationary environment which weakened consumer purchasing power, and particularly affected trade at both the wholesale and retail segments.
Time to Exit Recession
Thus far in the second quarter of the year, leading indicators suggest positive expectation for output growth. April 2017 PMI figures clearly show expansion in manufacturing (51.1) activities while the non-manufacturing sector (49.5) missed growth by a whisker.
In addition, the latest edition of the Global Economic Conditions Survey revealed a rebound in Nigeria’s business confidence. We anchor growth in Q2-2017 on recovery in the oil sector (on less disruptive output) and stronger growth in the non-oil sector (on continued improvement in the foreign exchange space, commencement of capital releases, and continued growth in agriculture).
Overall, we estimate GDP growth of 1.8 percent y/y in the second quarter of the year.
Over Q2-2017, the oil sector is poised to benefit from improved and stable production. The peace deal between the FGN, and Niger Delta stakeholders and representatives of disaffected youth groups, if not compromised, has the potential of supporting oil production beyond current levels. The Nigerian National Petroleum Corporation (NNPC) stated recently that the restoration of peace to the oil-producing communities has enabled the organization to fast-track the repairs of all pipelines vandalized last year, and thus targets to ramp up output above the budget benchmark of 2.2mbpd by the end of Q2-2017.
For evidence, the Forcados terminal (c.0.3mbpd) has been reported to be operating at near capacity. In addition to the interactive engagement, the FGN’s plan to establish a specialized paramilitary force (comprising coastal patrol teams, Niger Delta subsidiary police, and other paramilitary agencies) in the petroleum industry this year in a bid to ensure zero vandalism of pipelines will be impactful.
Still on government effort at resolving and sustaining peace in the troubled Niger Delta Region, a new state-focused plan, also known as the ring fenced state approach, is being considered by the FGN. Also instructive is the passage of the Petroleum Industry Governance Bill (PIGB), yesterday, which has the potential of attracting fresh investments into the industry.
The non-oil sector should benefit from improved flow of crude oil revenue and continued growth in agriculture on continued focus from both private sector and the government. Stable crude oil production and relatively higher average prices (on OPEC’s commitment to its output cut agreement by way of extending the term of the deal), while bolstering the spending capacity of the fiscal authorities (in implementing the 2017 budget), should provide enough comfort for the monetary authority (to a certain degree) to sustain its frequent forex interventions. We think the CBN’s resolve to increasing the availability of dollars to large scale businesses and retail users, if uncompromised (by policies somersault), and assuming oil prices and production are unimpaired, will lessen the disruptive impact of FX shortage on the economy. In particular, services, trade and manufacturing sectors should benefit from the increased availability of the foreign exchange.
Growth in agriculture will remain strong in the second quarter, and by extension, the remaining part of the year. On crop production specifically, dry season harvest is underway across the country, with generally favorable results being reported in most areas.
Particularly, according to a FEWSNET report, early green harvest of yams and maize are expected to be near-normal. In addition, area cultivated has equally increased, driven by elevated staple food prices (reflected in higher food inflation rate: 19.30% y/y in April) and increased government funding and support.
Also, seasonal forecasts for the rainy season through September/October indicate likelihood for average to above-average cumulative precipitation. These, in addition to anticipated implementation of agriculture-related plans (e.g. recapitalization of the Bank of Agriculture for the provision of low-interest loans to farmers) in the ERGP, and a series of investments (both local and international), suggest increased yield on the horizon.
We look for stronger growth in the manufacturing sector, to be driven by (1) the CBN’s sustained commitment to forex stability, (2) fiscal stimulus from the 2017 appropriation bill which awaits presidential assent, following which the establishment of the FGN Satellite Industrial Centres (SICs) across the six geo-political zones of the country will commence, (3) potential gains from the recently launched Economic Recovery and Growth Plan (ERGP), (4) indications of improved consolidated refinery capacity utilization (25 percent in Q1-2017 vs. 11 percent in the corresponding quarter of 2016), and (5) sustained improvement in power generation, on the back of cessation of hostilities by militants in the Niger Delta, and the rise in water level at the various dams in the country.
Growth should rebound across the services sector, hinged on (1) government effort at improving the ease of doing business in Nigeria, as the Presidential Enabling Business Environment Council (PEBEC) rolled out and set to implement fresh reforms to consolidate and deepen the impact of its previous plan, (2) the recent approval, by the FGN, of the reduction of documentation requirements and timeline for import and export trade transactions to 48 hours, and (3) the CBN’s recent and sustained commitment to forex stability, particularly narrowing the spread between the official and parallel segments of the currency market rates, and creating a special window for SMEs.
Analyst for this report was Peter Moses (pe*********@*****os.com).
By Adedapo Adesanya
The Senate has passed a bill to repeal and re-enact the law establishing the National Insurance Commission (NAICOM), paving the way for the regulatory agency to be renamed the Insurance Regulatory Commission (IRC).
The legislation, titled the Insurance Regulatory Commission (Establishment) Bill, 2026, was passed after the Senate considered and adopted the report of its committee on banking, insurance and other financial institutions.
The Chairman of the committee, Mr Adetokunbo Abiru, the senator representing Lagos East, who presented the report, stated that the proposed legislation was necessary because the existing National Insurance Commission Act of 1997 had become outdated and no longer reflected the realities of Nigeria’s evolving insurance industry or global regulatory standards.
According to the Senate, the decision to change the Commission’s name was informed by the need to eliminate confusion associated with the existing designation and to better reflect the institution’s regulatory mandate within Nigeria’s insurance industry.
The bill also provides legal protection for the commission and its officers against adverse claims arising from the lawful execution of their statutory duties.
However, he noted that the commission’s enabling law had become obsolete, exposing significant regulatory gaps that required urgent legislative intervention.
‘The current National Insurance Commission Act 1997 is outdated and does not adequately address the emerging economic growth, needs and development of the insurance business,” the lawmaker said.
He explained that the new legislation seeks to strengthen the independence of the commission by empowering it to make regulatory decisions without undue influence in the country’s insurance sector.
According to him, the bill also enhances the commission’s authority to exchange information and collaborate with domestic and international regulatory bodies, issue regulations, guidelines, standards and directives on insurance-related matters, and intervene more effectively in financially distressed insurance companies to protect policyholders and preserve financial stability.
This marks yet another move to strengthen the country’s insurance sector following the enactment of the Nigerian Insurance Industry Reform Act (NIIRA) of 2025 and the industry-wide recapitalisation exercise, which will wrap up by July 31.
By Adedapo Adesanya
About 143 companies that successfully passed the technical and prequalification stages of the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) 2025 Licensing Round will, today, compete for 50 oil and gas blocks at the commercial bid conference in Abuja, the final stage in the allocation process for the assets.
The commission said only the prequalified companies have been invited to attend the event, which will hold at the Conference Centre of the Transcorp Hilton Hotel, Abuja, stressing that participation is strictly by invitation.
The commercial bid conference will determine the successful bidders for oil and gas assets located across Nigeria’s producing and frontier basins.
The 50 blocks comprise 16 onshore blocks and 18 shallow water blocks in the Niger Delta, one deep offshore block, three onshore blocks in the Benin Basin, four in the Anambra Basin, four in the Chad Basin, and four in the Benue Trough.
According to the commission, the winning bids will be determined through a transparent evaluation process based on clearly defined commercial parameters. These include the signature bonus offered by bidders, the proposed work programme commitment and the level of performance security provided. The final selection will be based on a weighted technical and commercial score.
The licensing round is being conducted under the provisions of the Petroleum Industry Act (PIA) 2021, which requires a transparent and competitive process for the award of petroleum assets.
NUPRC had announced the commencement of the 2025 Licensing Round on November 11, 2025, before opening the online bid portal on December 1, 2025, to enable interested companies to register and participate in the exercise.
To ensure prospective investors fully understood the requirements, the commission organised a pre-bid conference on January 14, 2026, at Eko Hotels and Suites, Lagos. The event provided detailed explanations on the licensing guidelines and bidding procedures to registered participants and other stakeholders.
Registration and submission of prequalification documents closed on February 27, 2026, while the prequalification evaluation was completed on March 16, 2026.
NUPRC disclosed that 286 companies initially submitted applications for prequalification.
Following the evaluation process, 196 companies were cleared to participate in the technical and commercial bid stages.
The prequalified 143 companies eventually submitted a total of 200 bids for the available oil and gas blocks. These companies are now set to compete at the commercial bid conference, where the financial offers will be opened and evaluated to determine the eventual winners.
The licensing round is expected to attract fresh investment into Nigeria’s upstream petroleum sector, boost exploration activities across both producing and frontier basins, increase crude oil and gas reserves, and support the country’s drive to grow production and government revenue.
It also underscores the regulator’s commitment to implementing a transparent, competitive and investor-friendly licensing regime under the Petroleum Industry Act.
By Adedapo Adesanya
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained all key monetary policy parameters following the conclusion of its two-day meeting on July 21, 2026, on Tuesday, maintaining its tight monetary policy stance to curb inflation and support macroeconomic stability.
According to the Governor of the apex bank, Mr Yemi Cardoso, who chaired the committee, the Monetary Policy Rate (MPR), which serves as the benchmark interest rate, remains at 26.50 per cent. The MPC also retained the asymmetric corridor around the MPR at +50 basis points and -450 basis points.
In addition, the Cash Reserve Ratio (CRR) for commercial banks was left unchanged at 45.00 per cent, while the CRR for merchant banks remains at 16.00 per cent. The committee also retained the CRR on non-Treasury Single Account (Non-TSA) public sector deposits at 75.00 per cent, with the liquidity ratio at 30.00 per cent.
The decision reflects the apex bank’s continued commitment to containing inflationary pressures through a restrictive monetary policy while safeguarding the resilience of Nigeria’s financial system amid ongoing macroeconomic adjustments.
By keeping all policy tools unchanged, the MPC signalled its intention to continue managing excess liquidity in the banking sector and maintain stability in financial markets.
The move is also expected to provide greater policy certainty for investors and businesses monitoring the country’s monetary policy direction.
The latest decision also means borrowing costs are likely to remain elevated in the near term as the central bank continues to prioritise price stability over monetary easing.
Analysts had expected the CBN committee to retain the rate after Nigeria’s headline inflation came in at 15.91 per cent as of June 2026, marking a slight decline from 15.93 per cent in May.
However, even as overall price growth has moderated significantly compared to previous periods, food inflation remains a persistent challenge, accelerating to 17.52 per cent in June.
