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Nigeria’s Economy Shrinks by 2.2% in Third Quarter

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  • Nigeria’s Economy Shrinks by 2.2% in Third Quarter

Nigeria’s economy contracted in the third quarter as businesses struggled to access foreign exchange and rebels continued to bomb oil pipelines in the restive south, official data showed Monday.

“The nation’s gross domestic product (GDP) contracted by -2.24% year-on-year,” the country’s National Bureau of Statistics said in a report.

The Nigerian economy is reeling and bruised following the crash in global oil prices from over $100 a barrel in 2014 to around half that today.

A contraction appeared inevitable when militants renewed attacks on the country’s oil infrastructure, strangling production that accounts for around 70 per cent of government revenue and the bulk of Nigeria’s export earnings.

The relentless sabotage has put the Nigerian government under pressure as economists increasingly question whether President Muhammadu Buhari can pull the country out of recession.

“During the period under review, oil production averaged at 1.63 million barrels per day (bpd),” the statistics agency said.

That is a 22-percent drop from the same period last year, when Nigeria was producing 2.17 million bpd.

Manufacturing also took a big hit, shrinking by 2.9 percent in the wake of a devalued naira and currency controls that have curbed trade.

“This is partly due to the continued fall in the exchange rate, which makes imported inputs more expensive, thereby increasing business costs,” the statistics agency said.

“This is greatly a result of the continued fall in (the) naira to dollar rate which translates to much higher cost of business operations.”

In early 2016, Buhari had vowed not to “kill the naira” by letting it fall in value, in opposition to depreciations by fellow major oil exporters Angola and Russia.

His government tried to prop up the naira for months, but that drained foreign currency reserves and it eventually abandoned the currency peg in June.

A dollar shortage persists, with black market rates hovering around 440 naira to the dollar this month compared to the official bank rate of approximately 320 naira to the dollar.

The economic troubles look to last, with peace talks between the Nigerian government and oil rebels falling apart this month — the Niger Delta Avengers claimed they bombed three pipelines last week — and foreign investors steering clear until they see a more coherent currency policy.

The International Monetary Fund has forecast the West African nation’s gross domestic product will shrink by 1.7 percent this year, the first full-year contraction in more than two decades, according to Bloomberg News.

AFP

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

CBN Predicts 2 Percent Growth for Nigeria in 2021

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Despite the economic recession and numerous uncertainties encompassing Nigeria in recent months, the Central Bank of Nigeria (CBN) has said the nation will grow by 2 percent in 2021.

Speaking at the 2020 bankers’ dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN), Godwin Emefiele, the Governor, CBN, said implemented government intervention programmes will aid the nation’s recovery by next year.

Emefiele further stated that the intervention efforts represent around 3.5 percent of Nigeria’s current Gross Domestic Product (GDP).

He said, “Our actions in 2021 would be guided by the considerations that emerged from the Monetary Policy Committee meeting of November 23 & 24, 2020, which sought to address the major headwinds exerting downward pressure on output growth and upward pressure on domestic prices.”

On fast declining foreign reserves, the Governor said the institution has adopted a demand management framework designed to boost the production of items that can be produced locally and aid conservation of external reserves.

Due to the unprecedented nature of the shock, we continued to favour a gradual liberalisation of the foreign exchange market in order to smoothen exchange rate volatility and mitigate the impact which rapid changes in the exchange rate could have on key macro-economic variables,” Emefiele stated.

The CBN projection came few weeks after the National Bureau of Statistics (NBS)’s report showed Africa’s largest economy contracted by 3.62 percent in the third quarter following a 6.10 percent decline posted in the second quarter. Nigeria officially slid into the worse economic recession in almost 30 years and the second economic recession under the current administration.

While, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has projected that Nigeria would rebound from the recession in this final quarter or the very first quarter of 2021, falling revenue generation, rising capital flight amid weak demand due to the negative impact of coronavirus on earnings, household incomes and lack of jobs remain a concern.

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Economy

COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday

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Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.

Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.

The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.

OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.

This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.

Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.

The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.

President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.

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Economy

Seyi Makinde Proposes N266.6 Billion Budget for Oyo State in 2021

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The Executive Governor of Oyo State, Seyi Makinde, has presented the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly on Monday.

The proposed budget titled “Budget of Continued Consolidation” was said to be prepared with input from stakeholders in all seven geopolitical zones of Oyo state.

Governor Makinde disclosed this via his official Twitter handle @seyiamakinde.

According to the governor, the proposed recurrent expenditure stood at N136,262,990,009.41 while the proposed capital expenditure was N130,381,283,295.63. Bringing the total proposed budget to N266,6444,273,305.04.

The administration aimed to implement at least 70 percent of the proposed budget if approved.

He said “The total budgeted sum is ₦266,644,273,305.04. The Recurrent Expenditure is ₦136,262,990,009.41 while the Capital Expenditure is ₦130,381,283,295.63. We are again, aiming for at least 70% implementation of the budget.”

He added that “It was my honour to present the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly, today. This Budget of Continued Consolidation was prepared with input from stakeholders in all seven geopolitical zones of our state.”

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