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Nigeria’s Economy Contracts 1.51% in 2016

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General Economy In Nigeria's Capital
  • Nigeria’s Economy Contracts 1.51% in 2016

The Nigerian economy contracted in the fourth quarter of 2016 for the fourth consecutive quarters. However, the rate of contraction has started reducing following the Federal Government efforts at bolstering economic activities.

The economy contracted 1.30 percent in the fourth quarter of 2016 to N18,292.95 billion, from N18,533.75 billion recorded in the fourth quarter (Q4) of 2015, according to the National Bureau of Statistics (NBS) report released on Tuesday.

This was -2.24 percent less than the decline recorded in the previous quarter but lower than the 2.11 percent growth rate recorded in the final quarter of 2015.

On a quarterly basis, real GDP rose 4.09 percent following rise in the general price level.

However, on a yearly basis, the economy contracted 1.51 percent, indicating real GDP of N67,984.20 billion for 2016. This reduction in the economic activities reflects weaker inflation-induced consumption demand, an increase in pipeline vandalism, significantly reduced foreign reserves and a weaker currency.

Also, it showed series of problems in the energy sector – lower electricity generation and struggling banking sector.

Oil Sector

According to the NBS, Oil output was estimated at 1.9 million barrels per day (mbpd) in the fourth quarter of 2016. Which was about 0.27 million barrels per day higher than output in the previous quarter, but lower than production in the same quarter of 2015 by 0.25 million barrels per day, when output was recorded at 2.16 mbpd.

“For the full year 2016, oil production was estimated to be 1.833 mbpd, compared to 2.13 mbpd in 2015. This reduction has largely been attributed to vandalism in the Niger Delta region. As a result, the sector contracted by -13.65 percent; a more significant decline than that in 2015 of -5.45 percent. This reduced the oil sectors share of real GDP to 8.42 percent in 2016, compared to 9.61% in 2015.

“In the fourth quarter of 2016 this sector declined by -12.38 percent in real term (year-on-year). This was an improvement relative to the previous quarter, when the sector declined by -22.01 percent, but nevertheless was a more severe decline than in the fourth quarter of 2015, when a contraction of -8.23 percent was recorded.

“Quarter-on-Quarter, real oil GDP grew 8.07 percent. As a share of the economy, the Oil sector represented 7.15% of total real GDP, compared to 8.06 percent in Q4 2015 and 8.19 percent in Q3 2016.”

Non-oil Sector

“The non-oil sector declined by -0.33 percent in real terms in the fourth quarter of 2016. This was 0.36 percent points lower than growth of 0.03 percent recorded in Q3 2016, and 3.46 percent points lower than the 3.14 percent growth recorded in Q4 2015. Given that the growth rate was stronger than in the oil sector, the non-oil sector increased its share of GDP to 92.85 percent, from 91.94 percent in the fourth quarter of 2015.

“The sector to weigh on non-oil growth the most was Real Estate, which declined by -9.27 percent and contributed to –0.77 percent points to year on year growth in total real GDP. However, Manufacturing, Construction and Trade also made significant downwards contributions, ameliorated slightly by continuing strong growth in Agriculture (especially Crop Production).

“For full year 2016, the non-oil sector declined by -0.22 percent in real terms, compared to a growth rate of 3.75 percent in 2015, a difference of 3.97 percent points.”

The figures showed the pace of contraction has started cooling from the third quarter of 2016 and on track for economic recovery by the second quarter of 2017.

GDP

Similarly, for the past 4 months, the pace of increase of inflation rate has been reducing, indicating consumer prices are beginning to adjust to a series of policy been implemented by the Central Bank of Nigeria. This further validated CBN projection that economic recovery plan would start manifesting by the second quarter of 2017 following successful OPEC consensus in November 2016.

The Naira has gained N95 against the US dollar since the CBN introduced new forex policy last week and continued to do so as importers can now access dollar at a moderate exchange rate. Experts have said the continuous gain in the Naira value will curb surge in consumer prices and boost activities in the manufacturing sector.

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

COVID-19: CBN Has Disbursed N83B Loans to Healthcare Sector

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CACOVID

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, yesterday, said the central bank had disbursed over N83.9 billion to pharmaceutical and healthcare practitioners in the country since the outbreak of the COVID-19 pandemic in the country.

Also, Lagos State Governor, Mr. Babajide Sanwo-Olu, has stressed the need for a slash in the cost of governance in the country, saying a lot more resources could be dedicated towards healthcare and critical infrastructure.

They both said this yesterday, at the premiere of ‘Unmasked’, a documentary on Nigeria’s response to the pandemic held in Lagos.

Emefiele, who was represented by the CBN’s Director of Corporate Communications, Osita Nwasinobi, explained: “Building a robust healthcare infrastructure was also vital from a security perspective, as some nations had imposed restrictions on the exports of vital medical drugs as well as the use of drug patents that could aid in containing the spread of the pandemic.

“As a result, we focused our interventions in the healthcare sector on three areas. Building the capacity of our healthcare institutions supporting the domestic manufacturing of drugs by businesses, and providing grants to researchers in the medical field, in order to encourage them to develop breakthrough innovations that would address health challenges faced by Nigerians.

“In this regard, we disbursed over N83.9 billion in loans to pharmaceutical companies and healthcare practitioners, which is supporting 26 pharmaceutical and 56 medical projects across the country. We were also able to mobilise key stakeholders in the Nigerian economy through the CACOVID alliance, which led to the provision of over N25 billion in relief materials to affected households, and the set-up of 39 isolation centres across the country. These measures helped to expand and strengthen the capacity of our healthcare institutions to respond to the COVID-19 pandemic.”

According to the CBN Governor, the banking sector regulator also initiated the Healthcare Sector Research and Development Intervention Grant Scheme, which was to aid research on solutions that could address diseases such as COVID-19, and other communicable/non-communicable diseases.

He said so far, five major healthcare-related research projects were being financed under the initiative.

Speaking further on the call to increase access to health insurance, Emefiele said: “One key aspect which we would have to address is improving access to healthcare for all Nigerians. A key factor that has impeded access to healthcare for Nigerians is the prevailing cost of healthcare services.

“According to a study by World Health Organisation (WHO), only four percent of Nigerians have access to health insurance. Besides food, healthcare expenses are a significant component of average Nigeria’s personal expenditure.

“Out of pocket expenses on healthcare amount to close to 76 percent of total healthcare expenditure. At such levels of health spending, individuals particularly those in rural communities may be denied access to healthcare services.

“Expanding the insurance net to capture the pool of Nigerians not covered by existing health insurance schemes, could help to reduce the high out of pocket expenses on healthcare services by Nigerians. It will also help to increase the pool of funds that could be invested in building our healthcare infrastructure and in improving the existing welfare package of our healthcare workers.”

“The private sector has a significant role to play in this regard given the decline in government revenues as occasioned by the drop in commodity prices. Leveraging innovative solutions that can provide insurance services at relatively cheap prices could significantly help to improve access to healthcare for a large proportion of Nigerians particularly those in our rural communities.”

According to Emefiele, the CBN remains committed to working with all stakeholders in improving access to finance and credit that would support the development of viable healthcare infrastructure in our country.

On his part, Sanwo-Olu said: “What are the lessons that we have learned with the Covid-19? Looking at all the things that Covid-19 has cost us, how are we preparing ourselves?

“The truth be told the structure of our governance system needs to change particularly the cost of governance. We need to speak up and ask ourselves are we ready to change.”

“When it gets to the election it is the same set of people that will come up and people don’t come out to vote and we end up having 20 percent out of 100 percent that will elect those that will govern. So, the change has to be about all of us. That is how the real change that will help us will come,” he added.

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Economy

Emefiele Says CBN Will Resist All Attempts to Continue Maize Importation

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Farm input

The Central Bank of Nigeria (CBN) has vowed to resist all attempts to continue the importation of maize into the country.

Godwin Emefiele, the governor, CBN, in a statement titled ‘Emefiele woos youths to embrace agriculture’, said: “the CBN would resist attempts by those who seek to continually import maize into the country.”

Emefiele, who spoke in Katsina during the unveiling of the first maize pyramid and inauguration of the 2021 maize wet season farming under the CBN-Maize Association of Nigeria Anchor Borrowers’ Programme, said maize farmers in the country had what it takes to meet the maize demand gap of over 4.5 million metric tonnes in the country.

With over 50,000 bags of maize available on this ground, and others aggregated across the country, maize farmers are sending a resounding message that we can grow enough maize to meet the country’s demand,” Emefiele said.

He explained that the maize unveiled at the ceremony would be sold to reputable feed processors.

He added that this would in turn impact positively on current poultry feed prices, as over 60 per cent of maize produced in the country were used for producing poultry feed.

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Economy

Nigeria’s Spending Structure Unsustainable, Budget Head Says

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interbank

Nigeria’s current trend of spending more money on running the government than on building new infrastructure is unsustainable, the country’s top budget oversight official said.

Low revenue collection and high recurrent costs have resulted in actual capital expenditure below two trillion naira ($4.88 billion) a year for a decade, Ben Akabueze, director-general of the Budget Office, said Tuesday in a virtual presentation.

“Hence, the investments required to bridge the infrastructure gap are way beyond the means available to the government,” Akabueze said. Recurrent spending, allocated towards salaries and running costs, has accounted for more than 75% of the public budget every year since 2011, he said.

Africa’s largest economy requires at least $3 trillion of spending over the next 30 years to close its infrastructure gap, Moody’s Investors Service said in November. The country’s tax revenue as a proportion of gross domestic product is one of the lowest globally, according to the International Monetary Fund.

“Huge recurrent expenditure has constrained the provision of good roads, steady power supply, health care services, quality education and quality shelter,” Akabueze said.

Nigeria should amend its constitution to create six regions to replace the existing 36 states, which each have their own governments, Akabueze said. The country also needs to reduce the number of cabinet ministers to a maximum of 24 from more than 40 and cut federal ministries to fewer than 20 from the current 27, he said.

“No country can develop where a large part of its earnings is spent on administrative structures rather than on capital investment,” Akabueze said.

 

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