GDP Growth Declines To 2.31% In Q1 Due To Currency Crisis

The first quarter of 2023 marked 2.31 percent growth, indicating a decline compared to the previous year's GDP growth of 3.11 percent. According to the National Bureau of Statistics (NBS), the decline has been caused by the cash crunch in the country.

"The reduction in growth is attributed to the adverse effects of the cash crunch experienced during the quarter," NBS shared in a report on Wednesday. "The performance of the GDP in the first quarter of 2023 was driven mainly by the services sector, which recorded a growth of 4.35 percent and contributed 57.29 percent to the aggregate GDP."

"The agriculture sector grew by -0.90%, lower than the growth of 3.16% recorded in the first quarter of 2022," the report stated. However, the industry sector recorded growth as it improved to 0.31%.

NBS said that the aggregate GDP stood at N51.24 million in nominal terms, noting that this performance is higher compared to the first quarter of 2022 which recorded aggregate GDP of N45.31 million. This means the nominal growth is 13.07%.

Taking the non-oil sector into consideration, it grew by 2.77% this year while last year it was 3.30%.

The non-oil sector consists of Information and Communication (Telecommunication), Financial and Insurance (Financial Institutions), Trade, Manufacturing (Food, Beverage & Tobacco), Construction; and Transportation & Storage (Road Transport).

Considering the growth in the non-oil sector, it has contributed 93.79% to the nation's GDP in the first quarter of 2023, higher than the share recorded in the first quarter of 2022 which was 93.37% and lower than the fourth quarter of 2022 recorded as 95.66%.

The oil sector, on the other hand, recorded a growth of "-4.21% (year-on-year) in Q1 2023, indicating an increase of 21.83% points relative to the rate recorded in the corresponding quarter of 2022 (-26.04%)."

The growth has increased by 9.18% compared to last year, which was -13.38%.

"The oil sector recorded a growth rate of 20.68% in Q1 2023," NBS mentioned. "The Oil sector contributed 6.21% to the total real GDP in Q1 2023, down from the figure recorded in the corresponding period of 2022 and up from the preceding quarter, where it contributed 6.63% and 4.34% respectively."

Nigeria is facing a cash crunch in the country following a new currency redesign policy, which mopped up over 70% of the cash. The country lost N20 trillion after the redesigning policy, which included three denominations of notes out of eight including N200, N500, and N1000. The new notes were launched on Nov. 23, 2022.

World Bank shared last month that the naira lost 10.2% of its value because of a rise in food and fuel prices in Nigeria.

The government encouraged people to use digital currency, eNaira but the International Monetary Fund (IMF) disclosed earlier this week that the usage of digital currency has been "disappointingly low."