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S’Africa Overtakes Nigeria as Africa’s Biggest Economy

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In dollar terms, South Africa is once again the biggest economy on the African continent, a position it reclaimed from Nigeria.

This was attributed to the appreciation of the rand, South Africa’s currency, and the devaluation of the Nigerian naira following the introduction of a flexible foreign exchange regime.

Using the Gross Domestic Product (GDP) at the end of 2015 published by the International Monetary Fund, Bloomberg reported that the size of South Africa’s economy was $301 billion at the rand’s current exchange rate, while Nigeria’s GDP was put at $296 billion.

Bloomberg noted that the rand has gained more than 16 per cent against the US currency since the start of 2016, while in contrast, Nigeria’s naira has lost more than a third of its value.

In afternoon trade wednesday, the rand firmed by more than a per cent against the dollar, to R13.29.

Despite the switch, Nigeria and South Africa both face the risk of recession, having contracted in the first quarter of the year, according to Bloomberg.

Nigeria’s economy shrank by 0.4 per cent, while South Africa’s GDP contracted by 0.2 per cent.
Nigeria has suffered amid low oil prices, while South Africa is sensitive to shifts in the commodity cycle.

“More than the growth outlook, in the short term the ranking of these economies is likely to be determined by exchange rate movements,” an economist at Exotix Partners LLP, Alan Cameron said.

He said although Nigeria was unlikely to be unseated as Africa’s largest economy in the long run, “the momentum that took it there in the first place is now long gone”.

Also, the Head of Research, SCM Capital Limited, Mr. Sewa Wusu, told THISDAY that the challenge of naira devaluation has caused a lot of economic challenges to the country, particularly with respect to the GDP.

“This should give policy makers the drive to rectify the forex challenges. Of course they have done their best by introducing a flexible exchange rate, but the issue is beyond that. The issue currently is about our forex earning potential.

“But I think the government is up to the challenge. I think we need a quick fix on the economy. That would help to support the naira and strengthen the currency,” Wusu added.

But the CEO, Cowry Asset Management Limited, Johnson Chukwu, said the priority of the government should be to restore economic growth, saying that if growth is not restored, the naira would continue to depreciate.

“When the economy begins to grow, the currency would adjust appropriately. So the focus of the government should be on whatever it intends to do to restore growth. We are heading into a recession and we should take steps to avoid depression.

“If growth is restored, eventually the economy would grow. There is no magic we can do for the naira to regain strength unless we restore growth,” Chukwu said in a phone interview with THISDAY.
The South African Reserve Bank forecasts zero growth for 2016, while unemployment still remains above 26 per cent. In July, South Africa stepped past Egypt as the continents’ second largest economy in dollar terms, having dropped behind the North African country earlier in the year.

Meanwhile, the naira dipped to N317 to the dollar on the interbank forex market yesterday, lower than the N312.50 from the previous day. On the parallel market, however, the naira firmed up slightly to N394 to the dollar, higher than the N395 on Tuesday.

The Central Bank of Nigeria intervened in the interbank forex market on Tuesday to help support the naira after it hit an all-time low of N350 to the dollar in thin trading on that day, traders had said.

The naira has been under pressure since the central bank floated the currency in June to allow it trade freely on the interbank market. The currency has been hit by a plunge in oil prices, Nigeria’s economic mainstay, which caused foreign investors to flee bond and equities markets.

The central bank last month told international money transfer operators to pay dollar proceeds from customer transfers into local commercial banks in naira, while selling the dollars themselves to bureau de change (BDC) outlets.

On Tuesday the central bank pegged the dollar transactions which banks can carry out with BDCs at $30,000 per week and set a margin for banks to sell dollar to currency outlets at not more than 1.5 per cent over the rate at which they bought.

The CBN hopes the move will help narrow the gulf between the official and black market rates and boost dollar liquidity, traders said.

The central bank set a margin of two per cent over the rate at which BDCs sourced dollars from banks as resale premium to customers and pegged BDC disbursement at $5,000 per transaction to cover travel allowance, medical bills and school fees.

The naira hit N400 against the dollar on the black market last week, weakened partly by dollar demand from individuals travelling abroad for their summer holidays, Reuters reported.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

400,000bpd of Crude Oil to be Refined in Three NNPC Refineries – Says FG 

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The Federal Government through the Nigerian Content Development and Monitoring Board (NCDMB) stated that the rehabilitation of the Nigerian National Petroleum Corporation (NNPC) refineries in Warri, Port Harcourt, and Kaduna will generate a minimum of 400,000 barrels per day. 

The production represents a minimum of 90 percent of the installed capacity of the four refineries, according to NCDMB. 

Executive Secretary of the board, Simbi Wabote, said the rejig effort is part of the refining roadmap of President Muhammadu Buhari. This, he said includes four focus areas such as the rehabilitation of the existing four national refineries, co-location of new refineries, construction of greenfield refineries and construction of modular refineries.

With that, he said the nation’s combined refining capacity will rise to over 1.4 million bpd in the next five years.

Speaking at the Nigerian Continent Midstream-Downstream Oil and Gas summit in Lagos, Wabote noted that there is a chance to maximize opportunities in the midstream and downstream sectors of the oil and gas industry.

He explained that the employment factor in the midstream and downstream sectors of the industry is higher in number and of longer duration when compared to that of the upstream sector.

“This provides means to absorb outputs of our Human Capacity Development programs in the form of job opportunities. The entry barrier for businesses to partake in the midstream and downstream sectors of the industry is relatively lower compared to that of the upstream sector,” he stated on the employment opportunities lurking in the industry,” Wabote continued. 

“There are vast business opportunities in the midstream to downstream sectors ranging from processing, transportation, storage, and distribution that could be started on a small scale and later scaled up to bigger enterprises thereby growing in-country capacities and capabilities.”

He noted that the direct social impact brought by a productive and efficient midstream and downstream sector of the oil and gas industry is another potential that needs to be maximized.

“There is a sense of pride for any citizen who has the confidence that he or she could take availability of energy sources for granted in whatever form such as electricity, fuels, gas, and others. These have direct correlation to quality of life, productivity, life expectancy, and social harmony,” he added. 

He further stated that NCDMB is in partnership with NNPC to construct a 50,000 liters petroleum products terminal in Brass Island to support the storage and distribution of white products in the coastal states of the country.

The theme of the summit tagged ‘‘Towards maximizing potentials in the Midstream and Downstream Oil & Gas Sector – A Local Content Perspective,’’ is based on its 10-year strategic roadmap to achieve 70 per cent Nigerian Content target in the oil and gas industry by the year 2027.

 

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Inflation Rate Increases to 16.82% in April in Nigeria

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Nigeria's Inflation Rate - Investors King

Prices of goods and services in Africa’s largest economy Nigeria rose high in the month of April, according to the latest report from the National Bureau of Statistics (NBS).

The Consumer Price Index, which measures inflation rate, grew at 16.82% rate in the month under review from 15.92% in March 2022. The inflation rate has been on a steady rise since Novermber 2021 when it drops to 15.40%.

On a month basis, inflation increased to 1.76 percent in April 2022, representing an increase of 0.02% from 1.74% recorded in March. The persistent increase in prices reflect the changes in Nigeria’s economic fundamentals. One of the key challenges impacting prices is foreign exchange scarcity.

Naira to Dollar exchange rate jumped to N600/US$1 at the parallel market popularly known as the black market despite the Central Bank of Nigeria discouraging patronage at that section of forex. However, inability to access forex at central bank designated deposit money banks forced most Nigerians to the unregulated black market.

Similarly, the drop in the nation’s external reserves due to the lower crude oil production from the year to date dragged on foreign revenue that eventually hurt central bank ability to service the economy with enough forex in an economy that imported over 90% of its consumption.

Again, rising insecurities in key food producing regions contributed to the jump in prices of food items as noted in the report. The composite food index grew at 18.37% rate in April 2022, slower than  the 22.72% filed in April 2021.

According to NBS, the increase in the value of the index was due to rise in prices of Bread and cereals, Food
products n.e.c, Potatoes, yam, and other tubers, Wine, Fish, Meat, and Oils.  On a monthly basis, food sub-index grew 0.01% to 2% in April from 1.99% in March.

However, the more accurate 12 month index reflect decline in food index from 19.21% filed in March 2022 to 18.88% in April 2022.

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Economy

ICT Changing The Face of Nigeria’s Economy

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Paris - Investors King

While many thought the oil sector would save the Nigerian economy, the drift is gradually shifting away from the oil sector into the non-oil sector – the Information and Communications Technology (ICT).

A recent data revealed by the National Bureau of Statistics, sighted by Investors King, shows that the ICT has contributed 16 per cent to the growth of Nigeria’s Gross Domestic Product (GDP). 

On a year-on-year basis, compared to the previous year in the same quarter, ICT contributed 14.9 per cent to the GDP – a growth of 1.3 per cent. 

According to the data released by NBS, “In nominal terms, in the first quarter of 2022 the sector growth was recorded at 20.54 per cent (year-on-year), 12.68 per cent points increase from the rate of 7.86 per cent recorded in the same quarter of 2021, and 14.84 per cent points higher than the rate recorded in the preceding quarter. The Quarter-on- Quarter growth rate recorded in the first quarter of 2022 was -1.87 per cent.  

“The Information and Communications sector contributed 10.55 per cent to the total Nominal GDP in the 2022 first quarter, higher than the rate of 9.91 per cent recorded in the same quarter of 2021 and higher than the 9.88 cent it contributed in the preceding quarter”.   

The report added that the sector, in the first quarter of 2022, recorded a growth rate of 12.07 per cent in real terms, year-on-year.

From the rate recorded in the corresponding period of 2021, there was an increase of 5.60 per cent points. Quarter-on-Quarter, the sector exhibited a growth of -9.09 per cent in real terms.  

“Therefore, of total real GDP, the sector contributed 16.20 per cent in 2022 first quarter, higher than in the same quarter of the previous year in which it represented 14.91 per cent and higher than the preceding quarter in which it represented 15.21 per cent,” the data revealed. 

The Information and Communications sector in Nigeria comprises of Telecommunications and Information Services, Publishing, Motion Picture, Sound Recording and Music Production and Broadcasting. 

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