2the dominant sector in terms of its contribution to non-oil GDP, realgrowth was more broad-based in the first half of 2008. The agriculturesector grew by 6.3% in the first half of 2008, accounting for about39.8% of GDP. Other sectors, building and construction, wholesaleand retail trade, and services, grew by 13.1%, 12%, and 10.3%,respectively. Industrial output (which constituted about 22.1% of non-oil GDP) declined by 1.9% in the first half of 2008 mostly due to poorinfrastructure, especially poor electricity supply.
Figure 2: Gross domestic product by activity (2007)
Source: National Bureau of Statistics
The slowdown in the agriculture sector was due to, among otherfactors, poor infrastructure, the global food crisis, and increases inprices. Responding to the crisis, the government undertook certainmeasures aimed at boosting either production or supply of agriculturalproducts. Some measures included: approving a tax holiday forimporters of rice between May and October 2008, approving therehabilitation of dilapidated irrigation infrastructure and expansion ofthe irrigation schemes, and also constructing 25 new silos to improvethe storage capacity of the National Food Reserve. The governmentalso implemented the Guaranteed Minimum Price for the buyer of lastresort scheme. Overall, the agricultural production index slowed downto 4.8% in the first half of 2008 from 7.4% in the second half of 2007.Even though the agricultural output was slower in the first half of 2008compared with the second half of 2007, growth was still recordedacross all sub-sectors. Average world prices of Nigeria’s majoragricultural export commodities at the London Commodities Market(cocoa, coffee, cotton, palm oil, copra, and soya bean) also trendedupwards, increasing by 18.8% in the first half of 2008 compared with36.1% in the corresponding period in 2007. This was mainly due tosupply shortages in the international markets.The decline in the index for industrial production by 1.6% in the firsthalf of 2008 was due to a decline in both manufacturing productionand electricity consumption. Performance in manufacturing productioncontinued to be constrained by poor infrastructure, especially poorelectricity supply, poor road networks, and a high pump price ofdiesel. Also, most locally produced goods continued to fare poorlydue to unfair competition from imported finished products.In the first half of 2008 electricity generation fell by 8.1% to about2,600 mega-watts per hour (MW/h) compared with the correspondingperiod in 2007. The continued disruption of gas supply, attacks oninfrastructure, and low water level at the hydro power stationsseverely affected electricity generation. Also, high power outages andemergency load shedding led to significant decline in electricityconsumption to about 1,900 Mw/h in the first half of 2008. This was a10.4% decline compared with the first half of 2007.Nigeria’s crude oil production continues on its declining path since aproduction peak of 2.5 mbd recorded in 2005. In the first half of 2008production averaged 1.98 mbd compared with an average of 2.16mbd in the second half of 2007.
Figure 3: Oil production and price
Source: Central Bank of Nigeria
The continued decline in production was due to instability in the NigerDelta region. Oil exports averaged about 1.49 mbd in the first half of2008 compared with 1.71 mbd in the second half of 2007. However,owing to the rise in the gas/oil ratio in the wells, gas productionincreased by 17.1% to an estimated 30.09 million cubic metres(MMm
) in the first half of 2008 from 25.70 MMm
in the second halfof 2007. Of the total gas produced, only 67.7% was utilised while32.3% was flared.
Figure 4: Gas production and utilisation (million cubic metres)
Source: Central Bank of Nigeria
Owing to mounting international and domestic pressures, headlineinflation, which had remained subdued and in the single digits sinceJune 2006, surged into double digits beginning June 2008. Acombination of high food and energy prices and fiscal expansion sawinflation increasing significantly from 6.6% y/y in December 2007 to
Agriculture,42.0Oil & gas,19.6Building &construction,1.7Finance &insurance,3.9Wholesale &retail trade,16.2Manufacturing, 4.0Telecommunication, 2.3Others, 10.3
20406080100120140160-0.51.01.52.02.53.03.52005 2006 2007 2008US$/barrelmillion bpdTotal production Bonny Light spot price (RHS)051015202530351H2006 2H2006 1H2007 2H2007 1H2008Gas produced Gas utilised Gas flared