Nigeria Can Hit 4% Growth In 2026 - Damilare Asimiyu

Added: 2026-05-27

[00:00:04]We continue the conversation on Nigeria's latest economic growth in the first quarter of 2026. Uh there are the numbers. A rise business analyst Chica Muno just talked about the need for this to filter down to the people. Let's speak with Dami Larry Asim who of course is a macroeconomic strategist with Afrey Invest Research and Consulting. Dam Larry, good to see you again. Thank you so much for joining us. Thanks for having me.

[00:00:27]>> A lot to discuss. So I look the um so I guess going from is it all things being equal going from Q4 from one year to Q1 historically isn't there a slowdown how do you how are you seeing the the latest figures >> um it depends on how you look at it but first and foremost I'd like to say that >> Nigeria economy is a procyclical fiscal consumption economy >> what I mean is that is an economic system in which the spending pattern of government and household shape how the economy perform. If you look at the trajectory of Nigeria Q1 growth, you observe that after Q4 there's always that slowdown because in Q4 there is large spending by household festivity.

[00:01:13]Also that's the time of the year where government also try to intensify effort in terms of implementing budget >> but Q1 is most often very slow. In fact, this recent Q1 number 3 uh.989, yes, is a slow slowdown compared to Q4.

[00:01:30]But if you track back, if we ignore the rebasing of GDP, this is actually the fastest Q1 since 2015. So, what that mean is that after Q4, it's like everybody I mean the economy going through a reset mode again. Uh most often there won't be budgets to kickstart the year. Currently, this year now, I'm not sure we have finally settled everything around the budget. So it took more than 3 months the budget.

[00:01:54]So that normally affects Kiwan plus the fact that Kiwan also um is planting season for for the agric sector right although the agric number this time around is also interesting but the point I'm trying to make is that Nigeria economy is a fiscal consumption procyclical one. So one that is largely shaped by how government is spending and how household is spending. And that is why and that is the reason why anytime government budgets has no clarity. We're always worried because it will have a trickle down effect on the overall performance of the economy.

[00:02:28]>> All right. Julie noted. So looking at non oil growth 3 uh what was it 94 versus 3.99 in the last quarter? Are we splitting hairs? Same much of a difference there when you look at um how non oil sector performed? Yeah, when you compare it to uh Q1 last year, um it's is it's an improvement, but it's when you compare it to Q4 and that's why I started by saying that Nigeria is a procyclical fiscal consumption. So Q4 is a unique period. So but when you compare it to Q1 last year the nono sector performed better and when you then look at the nono sector more more deeply of course over the last decade the cy sector has been the engine room powering powering the growth. It's very interesting that the sector has kept that momentum and is telling on the noise sector and if we expand it further you look at industries this time around there's also an improvement towards 3% level growth you then want to begin to trace down that that down to stability in FX as well as um um contained inflation at least for the first two months of the year before the uh crisis in the Middle East which uh involved US uh history on one hand versus uh Iran on the other hand affected energy prices.

[00:03:49]So definitely the nonoi sector performance it could do better because when you look at the when you look at sectors under the nonoi segment you see some sectors pulling their weight right and you see some that is underperforming you know sectors like testiles are underperforming when we have the potential even the 3.1 now that the agric pool in terms of quarterly growth which is one of the strongest key one in many years um uh below potential because prior to 2015 thing the agric sector was doing 6% even in Q1. So that means that uh uh we are not where we were like 3 years ago but there's there's a there's a steady progress but we can do better. So the nono sector continue to give hope.

[00:04:32]>> Okay. No great. Okay. So on that point non oil sector giving hope the contribution to the economy 96 um% and you've got the oil sector at 3.9.08 and oil at 3.8. However, and I think you've mentioned this in the past, the the Gulf when it comes to FX earnings, um what you know, since Nigeria is still disproportionately dependent on the oil sector, what needs to happen to close that gap where we can depend more on non- oil to get more effects.

[00:05:03]>> So the reality is that analyzing Nigeria economy uh you know data sometime can be a bit complex. When you look at that distribution you talked about oil accounts for US three slightly above 3% and non oil but the reality is that oil segment or the oil consistent of the economy still accounts for more than 70% of our FX >> no doubt about that now when the oil sector is doing well it has a trickle down effect on every sector I mean every sector if you drill down our education sector there is importation there to do the importation for academic items and what have you need FX that and from oil.

[00:05:41]>> The one of the reason why the banking non-performing loan uh data is easy in recent months is the fact that those in the oil segment they are performing better now and they able to meet their obligation. When you look at banks balance sheet in terms of their loan distribution more than 30% of the industry loan allocation this till now is still to the oil and gas industry. So when they get hending you count it as no henning but meanwhile it came from the ho segment. The same thing with manufacturers right the imputes they use some of the imputes they use they are still indirectly from the ho segment but but the reality is that and that's in the meantime >> the oil sector is still very critical to Nigerian economy the more prosperous that sector is the more it will have positive trickle effect on every sector.

[00:06:31]Now what can we do to ensure that Nigeria is not overdependent on the HO sector? I think that's um not a short-term uh agenda and that's why we should have what we call uh a developmental plan. A developmental plan are plans to develop an economy with from 10 years and above whereby the country will uh strengthen the productive capacity in area where it has comparative advantage. You talk of China now as the global manufacturer of the world. China account for almost 20% of global manufacturing export. So they didn't arrive that in one day. They deliberately built some capacity power road and you know and and strengthen you know human capacity development because it's not about going to school alone but developing skills and you know acquiring those skills where they are highly needed. Nigeria has a lot of developmental plan but we are not pursuing it to the latter. So if we are if we're able to do that our agric sector exports will shoot up.

[00:07:33]Entertainment is one of the areas we can get a lot and so many other sectors.

[00:07:37]Manufacturing Nigeria should be the manufacturing hub of Africa and not the other way around. So these are the things we can do to make the economy to pivot away from oil reliance to nono sector reliance. But for now even though the data is showing that nono sector is 96 and oil is 3%. the oil sector should converse in every other sector like we see in the last uh recessions. Um okay, speaking of which though, while we're still on oil, what do you make of the slowdown from about 6% in Q4? So we are 2.5 uh in Q1. What do you make of that slowdown there for the oil sector?

[00:08:15]>> Yeah. Um when you look at the data critically, the 2.1 we had in Q1 now was better than Q1 last year at about 1 point something. Yeah, >> it is when you compare it to December Q4 rather Q4 2025 that you see moving down from 6 to 2. What it mean is that the Q4 own that was 6 something 2025 was against a very low base in 2024. If you check the oil sector growth in 2024 if is not in contraction it's marginally up. So there was a sort of low base impact supporting the oil sector because if you look at the dynamics now simulating different models even though uh our mody suggests that Nigeria is still missing out on the windfall gain we should be reaping now but yet we are on still on the net positive. What I meant is that our initial budget um baseline for revenue from oil is about um $64.

[00:09:11]Then before it was the budget was passed for this year, they jack it up to 74 after seeing what is happening in the Middle East and knowing that that tension might likely last for the rest of the year. But even with that, we have a benchmark budget price of $74 and oil is trading for most of the last 3 months above $100. So that is a winfoging.

[00:09:31]However, where there's a problem is on the production leg which has to do with structural issues that we have been you know battling for many years and we seem not to have you know um a sort of clarity on how to address them. But even with that even with our production at about 1.5 million barrels per day at that revenue level Nigeria is still a net gainer from this development. So definitely the 2.1 growth Q1 versus 1 something in in Q1 2025 shows you that the oil sector benefited a bit but that 6% in Q4 last year was more of benefiting from a low base because aside from volume that is lower now compared to last quarter price is favorable to Nigeria and that is why the government could uh think of increasing the baseline but we could do better we could have achieved better we could have gain more better. A lot of countries are, you know, they're smiling to the bank now in quotes in terms of excess earnings, but fortunately, we are not able to meet our budget production cap of about 1.84 million barrels per day.

[00:10:34]>> You you already touched on agriculture.

[00:10:36]I mean, the growth 3.1% uh in Q1. Um uh so you know but I guess if you want to just return to your point about um what you made of that growth and I guess what we can how agriculture can be boosted further. I I must confess that when I saw the agricult I mean it's it it was a it was a positive shock to me because seeing agric 3% the last time it ever did more than that in Q1 was way back in 2014 2015 period because uh first Q1 is a planting season so there's a seasonality drawback then secondly the sector have been highly ravaged by insecurity ity over the years. So the the Q1 growth now the major driver I will attribute that to is the increasing involvement of private players in the agric sector. If you recover the last couple of months players like Presco, Okumo have invested so much in their agric uh sector space expanding capacity. We also have some local uh players who have invested so much and this is why we believe that if the government can create the enabling environment for private player in scale because one of the things that the likes of Oko and Presco will bring into the agriculture space is that they'll bring technology they will not use manual labor you know um uh where you need five 10 people to work they will just deploy a tractor and increase productivity as of today Right. Nigeria's um um tractor usage compared to peer countries like South Africa is very very very very minuscule. Nigeria has about one tractor per square meter west Africa have 43 and you know government seems to be overboarding with so many things. So you need private sector who can finance this to to play in that space and for uh the you know peace and farmers too. One of the ways of encourage them is to ensure that they are secured. we can't take them away in one day because we have over 70% of our players in the agric sector those in crop planting in the pant pant leg so definitely the the the positive I pick from that is we're beginning to see more investment by private players in agric sector and government cannot but just provide the enabling environment for them support them with in with security and ensure that their process of export because with some of the uh development in the global econ economy now chaos you know uncertainty it creates room for Nigerian product you know value hard ones to penetrate several markets and bring in more effects for us I just I just love how you break these things down okay let me manufacture let's just just get your thoughts there so we got what 3.29% 29% growth in manufacturing. So is manufacturing still an FX and electricity story in terms of output?

[00:13:34]What's what's your >> I mean yeah that's the fact. Yeah because when you looked at 2023 to 2024 those two years the manufacturing sector was largely devastated >> because of the FX problem and energy. uh for the half part of last year we had uh in fact we had disinflation for almost 11 months before the current shock so and we started having FX stability in fact diner has been gaining in the if you if you look at over the last 15 months so those two development have been positive for the manufacturing sector the effect of the war which has pushed up energy prices now didn't really tell much on the manufacturing sector because the war started February 28th so many that it was only the um the production activities in March that was affected and again for March many of them will have large inventory to draw from but Q2 numbers for the manufacturing sector is the one that I feel might be worrisome because they will then now be open or they'll be exposed to the full weight of the negative shock from the energy. Don't forget PMS was still around. Diesel PMS were around 800 and around 1,00 1,0001 before the war and now we know where it is 1,0003 plus 1,000 heat and so many other items. So the manufacturing sector or the industry sector did decently in uh Q1 because of the stability. Yes, FX is still stable but the shock on energy commodities from March will tell on Q2 numbers for that industry. Great stuff.

[00:15:12]So, D, just to wrap up, what's your I know there's the Iran war and everything else going on. I know it's only one quarter. Are we still What's your outlook for the economy? Are we still on track for 4% growth this year? How do you I know there's so many intangibles, but >> of course, of course. I mean, this Q1 number is even uh you know, a a positive pointer to the fact that Nigerian can do 4%. Last year we narrowly missed out of 4% 3.9 something with a 3.9 also in Q1 historically Q1 is our weakest quarter Q2 and Q4 used to be the strongest and when you then look at some of the things that are you know ahead of course even the current crisis uh in terms of the energy issue should be a net positive for us because we are a crude oil producer and luckily locally now we now have a refiner to meet local needs to a large extent. So definitely uh and then we'll have political spending which will trickle down to uh services demand and consumption demand because I I see the manufacturing sector or those in the food beverage and tobacco you know making good turnover in Q3 Q4 when uh political activity will will peak leading to u a year hand festivity. So definitely uh the the signs are there that we can we are likely to uh cross uh a 4% growth this all else equal. Damar assuming you as I always tell you always a a master class whenever I I sit down and listen to you talk about the economy and that's the reason why we always keep calling on you to come and talk whenever GDP inflation and so on out microeconomic strategist with Afro investor research and consulting a real pleasure. Thank you so much.

[00:16:50]>> Thank you for having me.