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Negative Growth in Real Sector Contradicts Government’s GDP Numbers



  • Negative Growth in Real Sector Contradicts Government’s GDP Numbers

Although the Presidency hailed the third quarter (Q3) Gross Domestic Product (GDP) report released by the National Bureau of Statistics (NBS) yesterday, a break-down indicates manufacturing, a critical sector of the economy, has actually suffered a setback.

The NBS disclosed that the GDP grew by 1.40 per cent, prompting the Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu, to remark: “The overall picture that emerges is that the economy is on the path of recovery. As inflation trends downwards, and with steady implementation of the Economic Recovery and Growth Plan (ERGP), real growth should soon be realised across all sectors in a mutually reinforcing manner.”

But despite manufacturing’s PMI rising to 55.0 points last month, indicating an expansion in the sector for the seventh consecutive month, the NBS data shows that the real GDP growth in the sector in Q3 was -2.85 per cent.

According to the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, the figure is a reflection of the serious setback suffered by the sector over the last couple of months, due to the challenges of foreign exchange, lack of infrastructure and non-availability of cheap working capital.

President of the Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, observed that, while the new growth figures are reassuring, “we must also be sure of the sources of the growth.”

He added that it would amount to “shortsightedness” to celebrate “just the numbers” when they were not realised by deliberate policies and actions of government.

According to Ajibola, “we must scrutinise the data. If the growth is fueled by oil and not non-oil sector, we are still at the same place and it is something to be cautious about.

For the Lagos-based economist, Bismarck Rewane, the growth is better than the earlier numbers, but “would not say whether or not it is a great feat for the country, as the battle for the return of the economy’s fundamentals remains` huge.”

Statistician General of the Federation, Dr. Yemi Kale had, in the report, insisted that the results also came from internationally-approved parameters like tax receipts from the Federal Inland Revenue Service (FIRS) and other administrative protocols.

United Kingdom-based urban and regional planner, Dr. Innocent Okpanum, described as ‘stunning’ and “impossible” the new Nigeria GDP figure figures.

“Elections are fast approaching, and NBS must have been asked to begin cooking up the GDP growth,” he said.

Okpanum’s position was re-echoed by another development economist, Mr. Odilim Enweagbara, who described the new numbers as “too good to be real, flying from a 0.55 per cent in Q2 to a miraculous level of 1.4 per cent.” Enweagbara insisted that the outcome might have been “politicised for electioneering gains.”

On a year-on-year basis, the GDP figure was higher than the same quarter of 2016 by 1.53 per cent and was -3.49 per cent points lower than the rate recorded in the preceding quarter. Also, growth rate of the sector on a quarter-on-quarter basis stands at 2.59 per cent. Real contribution of the sector to GDP in Q3 2017 is 8.81 per cent.

The NBS data was computed from 13 activities in the manufacturing sector: oil refining; cement; food, beverages and tobacco; textile, apparel and footwear; wood and wood products; pulp paper and paper products; chemical and pharmaceutical products; non-metallic products, plastic and rubber products; electrical and electronic, basic metal and iron and steel; motor vehicles and assembly; and other manufacturing.

Nominal GDP growth of manufacturing in Q3 2017 was 10.32 per cent (year-on-year), 13.25 per cent points higher than growth recorded in the corresponding period of 2016 (-2.93 per cent), but -5.65 per cent points lower than the preceding quarter growth of 15.97 per cent. Quarter-on-quarter growth of the sector was 3.21 per cent.

The contribution of manufacturing to nominal GDP in the current quarter was 8.55 per cent, lower than figures recorded in the corresponding period of 2016 at 8.60 per cent and for the second quarter of 2017 at 9.02 per cent.

“The availability of foreign exchange has aided the expansion of the PMI. GDP and overall performance is more than just purchasing. It is also about the purchasing power of consumers and cost of operations. All these factors affect the overall performance of the sector and they are yet to be in a positive position. Hence, the negative GDP growth recorded,” added Yusuf.

Speaking further on the NBS report, Dipeolu said: “This is a steady continuation of the positive growth of 0.55 per cent (now revised to 0.72 per cent) experienced in Q2 2017 and reinforces the exit from the 2016 recession. The positive growth in Q3 is consistent with the improvements in other indicators. Foreign exchange reserves have risen to nearly $34 billion while stock market and Purchasing Managers’ Indices (PMI) have also been positive.

“The naira exchange rate has stabilised while inflation has declined to 15.91 per cent from 18.7 in January 2017. While inflation is not declining as fast as desirable, it is approaching the estimated target of 15.74 per cent for the year in the ERGP. Agricultural growth was 3.06 per cent in the third quarter of 2017, maintaining the positive growth of the sector, even when there was a slow-down in the rest of the economy.”

He added: “The industrial sector grew at 8.83 per cent, mostly due to mining and quarrying. The oil sector grew very strongly as forecast in the ERGP and partly as a result of the policy actions in the plan to restore growth in the sector. The service sector is yet to recover but should soon begin to be positively affected by the improvements in the real economy and the effects of the dedicated and focused capital spending of over N1.2 trillion on infrastructure by the Federal Government.

“It is expected that the economy will continue to grow given these developments and the reform, and improvements in the business environment shown by the upward movement of 24 places in the recently released World Bank’s Ease of Doing Business Ranking, which was better than the target of 20 places specified in the ERGP.”

According to the NBS, the 1.40 per cent GDP growth in Q3 is 3.74 per cent higher than the rate recorded in the corresponding quarter of 2016, which indicated –2.34 per cent and higher by 0.68 per cent points from the rate recorded in the preceding quarter, which was revised to 0.72 per cent from 0.55 per cent. Quarter on quarter, real GDP growth was 8.97 per cent. Year-to-date real GDP growth stands at 0.43 percent.

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

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend




Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.


  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return



Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather




Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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