Wednesday, December 19, 2018 5:46:48 PM- Nigerian Stock Exchange.

  Q3 2017 GDP - Refinery shutdown plagues industry numbers


Nov 21 (Lagos) - Despite strong Manufacturing Purchasing Managers’ Index numbers for the quarter (average: 54.3 – record high), industrial output contracted 2.9% y/y in Q3’17 (Q2’17: 0.6%, Q3;16: -4.4%). 

Although growth in most manufacturing sub-sectors was flat or negative, cement production (-4.6% y/y) and oil refining (-45.4% y/y) were particular drags on the sector. Looking at cement industry data, cement volumes were down 11% y/y in Q3’17, so it is unsurprising that the cement sector persisted on its negative growth path (Q2’17: -4.2%, FY’16: -5.4%). 

Meanwhile, oil refining likely took a substantial hit from the shutdown of the Kaduna refinery (since May 2017) and stoppages at the Port Harcourt refinery in recent months. 

After an initial improvement at the start of the year, refinery capacity utilization has dropped – last recorded at 9.5% in August 2017. According to the Nigerian National Petroleum Corporation (NNPC), several firms have registered interest in revamping and maintaining the domestic refineries, and the NNPC may consider this in early 2018. 

In addition, the FG has approved a number of modular refineries, though we highlight that output from modular refineries would be too small to dent Nigeria’s oil volumes. 

With refinery down times expected to last through the year, we forecast manufacturing GDP growth of -1.1% y/y for Q4’17, translating to FY’17 GDP growth of -0.5% y/y.

reporting for on Tuesday, Nov 21 2017 from Lagos, Nigeria

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