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Economy Shrinks Again, MAN, LCCI See recovery in Third Quarter

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  • Economy Shrinks Again, MAN, LCCI See recovery in Third Quarter

The National Bureau of Statistics on Tuesday released the Gross Domestic Product report for the first quarter of this year, which showed that the economy contracted by 0.52 per cent in the period.

With the negative growth rate of -0.52 per cent, the Nigerian economy is still in recession.

The rate of growth for the first quarter of 2017 is, however, an improvement over the revised -1.73 per cent GDP growth rate as of December 2016.

This is the fifth consecutive quarter of contraction that the economy would record since the first quarter of 2016.

The NBS report read in part, “In the first quarter of 2017, the nation’s GDP contracted by 0.52 per cent (year-on-year) in real terms, representing the fifth consecutive quarter of contraction since Q1 2016.

“This is higher than the rate recorded in the corresponding quarter of 2016 and higher by 1.21 percentage points from the rate recorded in the preceding quarter.”

However, the rate of growth, which is an improvement over the previous quarter, appears to be in line with the expectations of the Federal Government that the country will come out of recession by June this year.

The Minister of Information and Culture, Lai Mohammed, had on April 29 said that Nigeria was gradually moving out of recession.

He said going by a recent statement by the Central Bank Governor, Mr. Godwin Emefiele, the country would exit recession by the end of June.

The NBS in the report stated that during the first quarter, the aggregate GDP stood at N26.02tn in nominal terms, representing an increase of 17.06 per cent over the N22.23tn recorded in the first quarter of 2016.

During the period under review, it explained that the average oil production was 1.83 million barrels per day, which was 70,000 barrels higher than the figure for the fourth quarter of 2016.

It added that real growth of the oil sector slowed by 11.64 per cent year-on-year in the first quarter of 2017, representing a decline of 4.81 per cent relative to the rate recorded in the corresponding quarter of last year.

Quarter-on-quarter, the oil sector, according to the report, grew by 14.86 per cent in the first three months of this year.

As a share of the economy, the NBS report stated that the oil sector contributed 8.90 per cent of the total real GDP in the first quarter, down from the 10.02 per cent recorded in the corresponding period of 2016.

For the non-oil sector, the bureau said growth was largely driven by the activities in the agriculture sector, particularly crop production, Information and Communication Technology, manufacturing, transportation, and other services.

It said, “The non-oil sector grew by 0.72 per cent in real terms during the reference quarter. This was 1.05 per cent higher than the rate recorded in the fourth quarter of 2016, and 0.90 per cent higher than the corresponding quarter of 2016.

“In real terms, the non-oil sector contributed 91.10 per cent to the nation’s GDP, higher from the share recorded in the first quarter of 2016 (89.98 per cent), but lower than the share recorded in the fourth quarter of 2016 (93.25 per cent).”

The report put the real growth rate of the agricultural sector in the first quarter of 2017 at 3.39 per cent year-on-year, representing an increase of 0.30 percentage points from the corresponding period of 2016.

For the manufacturing sector, the report stated that the real GDP growth in the sector in the first quarter of this year was 1.36 per cent year-on-year, higher than the same quarter of 2016 by 8.36 percentage points.

This, it added, was the first positive growth rate recorded in the sector for over a year.

The Manufacturers Association of Nigeria and the Lagos Chamber of Commerce and Industry have expressed optimism that following the 0.52 per cent contraction of the GDP in the first quarter, the economy should come out of recession in the second or third quarter.

“The 0.52 GDP contraction recorded in the first quarter is an improvement over the 1.73 contraction the economy recorded in December 2016. We are already on the verge of moving from the negative territory to positive territory. In December, it was -1.73 per cent; in March, it was -0.52; it is an improvement,” the Director-General, LCCI, Mr. Muda Yusuf, said.

“Some of the positive developments we witnessed in Q1 such as better foreign exchange policy, improvement in ease of doing business and creation of FX window will be reflected in the Q2 result that will be released later this year,” he added.

The President, MAN, Mr. Frank Jacobs, said he was not surprised by the negative GDP growth number because the country was not going to come out of recession overnight.

Jacobs said, “In as much as we are trying to get out of recession, it is not going to happen overnight. We expect that from Q3, we will begin to come out of recession. The current figure only shows that we are not yet out of the woods yet. We have to see how to manage production and seek to cope with some of the challenges facing manufacturers.”

Remarking on the outcome of Tuesday’s Monetary Policy Committee meeting, the MAN president said, “There is a need for a special window for manufacturers to access credit at five per cent interest rate. This will help them to play their role of creating jobs and also earn revenue in order to pay taxes.”

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

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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