Nigerian Economy Takes A Slow Turn In Third Quarter

Nigeria’s economic growth slowed slightly in the third quarter to 7.4 percent year-on-year as oil output dipped, but a rise in headline inflation in October strengthened expectations for an interest rate rise next week.

Gross domestic product (GDP) in Africa’s second-largest economy slowed from 7.72 per cent in the second quarter but was in line with expectations.

Food prices, the largest contributor to the consumer index, rose 9.7 percent year-on-year in October from 9.5 per cent the previous month.

The National Bureau of Statistics (NBS) provided that consumer inflation in Africa’s most populous nation rose to 10.5 per cent year-on-year in October, up from 10.3 per cent the previous month.

The statistics bureau said the non-oil sector increased its contribution to GDP last quarter, rising 8.81 per cent from a year earlier, compared with 8.38 per cent growth in the corresponding quarter of 2010, “largely driven by improved … agriculture, manufacturing, telecommunications, wholesale/retail trade, finance & insurance and other services sectors.”

“With a total contribution of 85.73 per cent to total GDP, the non-oil sector continued to be a major driver of the Nigerian economy in the third quarter of 2011 when compared with the corresponding quarter in 2010,” NBS said.

An NBS document also provided that, “While the non-oil sector grew with major contributions to growth coming from agriculture, wholesale/retail trade, telecommunications, manufacturing and finance/insurance sectors, the oil sector output, however, recorded a negative growth during the third quarter of 2011 arising from a decrease oil production”.

Finance Minister and Coordinator of the Economy, Ngozi Okonjo-Iweala has promised to unveil the 2012 budget this month, which is expected to show an increase in overall spending, while plans to remove subsidies on petrol beginning next year are also expected to put upward pressure on inflation.

The Central Bank of Nigeria (CBN), which will hold a rate-setting meeting next week, has said it would prefer consumer inflation to remain in single digits.

Analysts expect the CBN to raise rates again next week. It has increased its benchmark interest rate six times already this year to help curb high inflation and support the naira currency, which plunged to its weakest ever against the U.S. dollar in the interbank foreign exchange market last month.