Crude oil contribution to GDP down 13% - CBN Report

The Central Bank of Nigeria (CBN)’s Economic Report for the First Quarter of 2013, has revealed that oil output dropped to an average of 2.00Mb/d in 4Q12, from 2.45Mb/d in the previous quarter and 2.32Mb/d a year earlier. The fall in oil output in 4Q12, following floods that shut down production for about three weeks in October, was deeper than was expected, and may have reduced the overall GDP contribution from oil sector by about 13 per cent.

Accordingg to Renaissance Capital, the development was largely because the nation’s oil production declined for a second consecutive year in 2012 to 2.28Mb/d (against the government’s FY12 target of 2.38Mb/d), from 2.38Mb/d and 2.42Mb/d in 2011 and 2010, respectively. It noted that the country’s post-floods recovery in 1Q13 may have also been thwarted by a rise in oil theft as the apex bank highlighted the downside risk to oil output which necessitated a review of its forecast.

This explains the modest increase in oil output to 2.05Mb/d in 1Q13 as against 2.00Mb/d in the previous quarter down from 2.32Mb/d a year earlier. It stated that the below-par oil production explains the slowdown in GDP growth in 1Q13. Renaissance Capital noted that the development further slowed to 6.6 per cent YoY in 1Q13, from 6.9 per cent, YoY in 4Q12, but improved from 6.2 per cent YoY a year earlier.

Oil GDP’s significant contraction largely explains the slowdown in Nigeria’s GDP growth. Non-oil GDP growth slowed to 7.9 per cent YoY in 1Q13, from 8.2 per cent YoY the previous quarter, but was flat compared with a year earlier, given the dampening effect of the partial removal of the petrol subsidy in 1Q12.

In order for 2013 projection for oil production of 2.30Mb/d FY13 target of 2.53Mb/d) to be met, oil output will have to average 2.38Mb/d in the remaining three quarters of the year. Given the rise in oil theft, we do not think this is achievable, therefore, we further reduce our 2013 oil output projection to 2.15Mb/d. This implies a five per cent decline in oil GDP in 2013. GDP growth of 6.6-6.8 per cent is likely for Nigeria, as against previous estimate of 6.9 per cent by analyst.

In its assessment of the development in the external sector, analysts at Renaissance Capital noted that: “We think the biggest risk to the current account (CA) is a sustained fall in oil output. The price of Nigeria’s Bonny light crude oil averaged $112/bl in YtD, which is slightly lower than our $110/bl projection. “The downward adjustment in our oil output projection implies a CA surplus of 4.8 per cent of GDP (previously 6.9 per cent) down from 8.7 per cent in 2012.

They contended that the slowdown in the build-up of FX reserves since February and the decline in May partially reflect a narrowing Current Account a surplus.
The Sun.