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We’re Already Moving Out of Recession — Udoma

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  • We’re Already Moving Out of Recession

The Minister of Budget and National Planning, Senator Udo Udoma, on Thursday said that the country was already moving out of economic recession.

Udoma stated this in Abuja while inaugurating the Joint Planning Committee for the 23rd Nigerian Economic Summit.

The summit, to be held in October this year, is the single largest gathering of economic and financial experts from the private and public sectors.

The theme of this year’s summit is: ‘Actualising the Economic Recovery and Growth Plan: Opportunities, productivity and employment’.

However, the Federal Government and the International Monetary Fund have disagreed over how much the economy will grow this year, with the government saying 2.2 percent and the Fund opting for just 0.8 percent.

Either will be an improvement on last year, when Nigeria suffered its first recession in more than two decades as low crude prices and oil production slashed government revenues and caused chronic dollar shortages.

The government’s forecasts, seen by Reuters on Thursday, are contained in a document titled: ‘2018-2020 Medium Term Fiscal Framework and Strategy Paper’ dated July 27, which forms the basis for its 2018 budget.

It projects a big bounce back, to 2.2 per cent this year, 4.8 per cent in 2018 and 4.5 per cent in 2019, before reaching seven per cent in 2020.

The IMF, however, is not as bullish, saying on Wednesday it expected the Nigerian economy to grow by 0.8 per cent this year, with threats to growth remaining elevated.

Udoma said that while national debates in the past had centred on how the country could get out of recession, such was no longer the case with the adoption of the ERGP.

He stated that as the country was already on its way out of recession, the current efforts of the Federal Government were on how to build the current momentum of the growth trajectory.

This, according to him, has become imperative so as to ensure that the growth is maintained post-recession with positive impact on the people.

The minister said, “The 23rd Nigerian Economic Summit is coming at a time when the national debate is no longer about how to get out of recession; we are already moving in that direction with the adoption of the ERGP.

“Focus will, therefore, be on specific sectors such as infrastructure, manufacturing, renewable energy, housing, agribusiness, creative industries, retail trade and digitalisation. The summit will essentially be used to see how we can intensify efforts to implement the ERGP to create opportunities, tackle unemployment and improve productivity in Nigeria.”

Udoma added that the summit would be used to get stakeholders’ commitments toward a private sector led investment approach as set out in the ERGP.

He explained that the summit would also complement the Federal Government’s effort to create over 15 million direct jobs by 2020 through agriculture, manufacturing, construction and services, among others.

The Chief Executive Officer, Nigerian Economic Summit Group, Mr. Laoye Jaiyeola, said the committee would deliver a summit that would meet all expected outcomes.

He told the minister that the committee will use the summit to promote and support the actualisation of the ERGP.

Commenting on the growth projection, the Africa economist at Capital Economics, John Ashbourne, said, “I think that risks are to the downside rather than the upside, but 2.2 per cent isn’t outside the range of the possible now that oil prices and oil output are recovering.”

The country expects oil production to hit 2.3 million barrels per day and a price of $45 per barrel. It said oil production reached 1.9 million barrels between January and June 2017, including condensates.

Nigeria has promised OPEC to cap its crude oil output at 1.8 million bpd, although it does not include condensates in this total.

The country’s economy contracted by 0.5 per cent in the first quarter, its smallest fall in five quarters of decline.

The government projects the naira’s exchange rate to the dollar, which has traded at around 305 on the official market since 2016, to remain stable, while inflation will decline but remain in double-digits at 12.42 per cent next year.

The country has at least six exchange rates, which it has used to mask pressure on the naira after a drop in oil price caused foreign investors to flee, triggering a currency crisis.

The Central Bank of Nigeria has been working to converge the rates through dollar interventions but that is burning out reserves.

“Should there be any harmonisation in FX rates, as encouraged by the multilateral agencies, then an FX assumption of 305 is likely to prove unrealistic,” said Razia Khan, chief economist Africa at Standard Chartered Bank.

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.

Economy

Nigeria’s Growth Forecast Lowered to 3% for 2025, Higher than Most Emerging Markets

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IMF global - Investors King

The International Monetary Fund (IMF) has projected a 3% growth rate for Nigeria in 2025, slightly down from the 3.1% forecasted for 2024.

Despite this slight decline, Nigeria’s projected growth remains higher than that of many emerging markets as detailed in the IMF’s latest World Economic Outlook released on Tuesday.

In comparison, South Africa’s economy is expected to grow by 1.2% in 2025, up from 0.9% this year. Brazil’s growth is projected at 2.4% from 2.1% in 2024, and Mexico’s growth forecast stands at 1.6% for 2025, down from 2.2% in 2024.

However, India is anticipated to see a robust growth of 6.5% in 2025, although this is slightly lower than the 7% forecast for 2024.

The IMF’s projections come as Nigeria undertakes significant monetary reforms. The Central Bank of Nigeria has been working on clearing the foreign exchange backlog, and the federal government recently removed petrol subsidies.

These reforms aim to stabilize the economy, but the country continues to grapple with high inflation and increasing poverty levels, which pose challenges to sustained economic growth.

Sub-Saharan Africa as a whole is expected to see an improvement in growth, with projections of 4.1% in 2025, up from 3.7% in 2024. This regional outlook indicates a modest recovery as economies adjust to global economic conditions.

The IMF report underscores the need for cautious monetary policy. It recommends that central banks in emerging markets avoid easing their monetary stances too early to manage inflation risks and sustain economic growth.

In cases where inflation risks have materialized, central banks are advised to remain open to further tightening of monetary policy.

“Central banks should refrain from easing too early and should be prepared for further tightening if necessary,” the report stated. “Where inflation data encouragingly signal a durable return to price stability, monetary policy easing should proceed gradually to allow for necessary fiscal consolidation.”

The IMF also highlighted the importance of avoiding fiscal slippages, noting that fiscal policies may need to be significantly tighter than previously anticipated in some countries to ensure economic stability.

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Economy

Nigeria’s Inflation Rises to 34.19% in June Amid Rising Costs

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Food Inflation - Investors King

Nigeria’s headline inflation rate surged to 34.19% in June 2024, a significant increase from the 33.95% recorded in May.

This rise highlights the continuing pressures on the nation’s economy as the cost of living continues to climb.

On a year-on-year basis, the June 2024 inflation rate was 11.40 percentage points higher than the 22.79% recorded in June 2023.

This substantial increase shows the persistent challenges faced by consumers and businesses alike in coping with escalating prices.

The month-on-month inflation rate for June 2024 was 2.31%, slightly up from 2.14% in May 2024. This indicates that the pace at which prices are rising continues to accelerate, compounding the economic strain on households and enterprises.

A closer examination of the divisional contributions to the inflation index reveals that food and non-alcoholic beverages were the primary drivers, contributing 17.71% to the year-on-year increase.

Housing, water, electricity, gas, and other fuels followed, adding 5.72% to the inflationary pressures.

Other significant contributors included clothing and footwear (2.62%), transport (2.23%), and furnishings, household equipment, and maintenance (1.72%).

Sectors such as education, health, and miscellaneous goods and services also played notable roles, contributing 1.35%, 1.03%, and 0.57% respectively.

The rural and urban inflation rates also exhibited marked increases. Urban inflation reached 36.55% in June 2024, a rise of 12.23 percentage points from the 24.33% recorded in June 2023.

On a month-on-month basis, urban inflation was 2.46% in June, slightly higher than the 2.35% in May 2024. The twelve-month average for urban inflation stood at 32.08%, up 9.70 percentage points from June 2023’s 22.38%.

Rural inflation was similarly impacted, with a year-on-year rate of 32.09% in June 2024, an increase of 10.71 percentage points from June 2023’s 21.37%.

The month-on-month rural inflation rate rose to 2.17% in June, up from 1.94% in May 2024. The twelve-month average for rural inflation reached 28.15%, compared to 20.76% in June 2023.

The rising inflation rates pose significant challenges for the Central Bank of Nigeria (CBN) as it grapples with balancing monetary policy to rein in inflation while supporting economic growth.

The ongoing pressures from high food prices and energy costs necessitate urgent policy interventions to stabilize the economy and protect the purchasing power of Nigerians.

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Economy

Inflation to Climb Again in June, but at a Reduced Pace, Predicts Meristem

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Nigeria's Inflation Rate - Investors King

As Nigeria awaits the release of the National Bureau of Statistics’ report on June 2024 inflation, economic analysts project that while inflation will continue its upward trajectory, the pace of increase will moderate.

This comes after inflation rose to a 28-year high of 33.95% in May, up from 33.69% in April.

Meristem, a leading financial services company, has forecasted that June’s headline inflation will rise to 34.01%, a slight increase from May’s figure.

The firm attributes this persistent inflationary pressure to ongoing structural challenges in agriculture, high transportation costs, and the continuous depreciation of the naira.

Experts have highlighted several factors contributing to the inflationary trend. Insecurity in food-producing regions and high transportation costs have disrupted supply chains, while the depreciation of the naira has increased importation costs.

In May, food inflation grew at a slower pace, reaching 40.66%, but challenges in the agricultural sector, such as the infestation of tomato leaves, have led to higher prices for staples like tomatoes and yams.

Meristem predicts that food inflation will persist in June, driven by these lingering challenges. Increased demand during the Eid-el-Kabir celebration and rising importation costs are also expected to keep food prices elevated.

Core inflation, which excludes volatile items like food and energy, was at 27.04% in May. Meristem projects it to rise to 27.30% in June.

The firm notes that higher transportation costs and the depreciation of the naira will continue to push core inflation up.

However, they also anticipate a month-on-month moderation in the core index due to a relatively stable naira exchange rate during June, compared to a more significant depreciation in May.

Cowry Assets Management Limited has projected an even higher headline inflation figure of 34.25% for June, citing similar concerns.

The firm notes that over the past year, food prices in Nigeria have soared due to supply chain disruptions, currency depreciation, and climate change impacts on agriculture.

This has made basic staples increasingly unaffordable for many Nigerians, stretching household budgets.

As inflation continues to rise, analysts believe the Central Bank of Nigeria (CBN) will likely hike the benchmark lending rate again.

The CBN’s Monetary Policy Committee (MPC) has raised the Monetary Policy Rate (MPR) by 650 basis points this year, bringing it to 26.25% as of May 2024.

At a recent BusinessDay CEO Forum, CBN Governor Dr. Olayemi Cardoso emphasized the MPC’s commitment to tackling inflation, stating that while the country needs growth, controlling inflation is paramount.

“The MPC is not oblivious to the fact that the country does need growth. If these hikes hadn’t been done at the time, the naira would have almost tipped over, so it helped to stabilize the naira. Interest rates are not set by the CBN governor but by the MPC committee composed of independent-minded people. These are people not given to emotion but to data. The MPC clarified that the major issue is taming inflation, and they would do what is necessary to tame it,” Cardoso said.

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