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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.

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

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Oil Prices Surge in Asian Trading on OPEC+ Meeting Expectations



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Oil prices surged during Asian trading hours on Wednesday amid mounting expectations that major oil-producing nations will uphold output cuts at an impending meeting of the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

Brent crude oil, against which Nigerian oil is priced, gained 18 cents, or 0.2% to $84.40 per barrel while the U.S. West Texas Intermediate (WTI) rose by 28 cents, or 0.3%, to $80.11.

The anticipation gripping traders and analysts alike centers on OPEC+ sustaining voluntary production cuts, which currently total about 2.2 million barrels per day.

Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, underscored the significance of this move, asserting that it would be perceived as a concerted effort to stabilize prices and rebalance the global oil market.

Sachdeva further elaborated on the factors bolstering oil prices, noting, “The onset of the summer driving season in the U.S. spurs a seasonal uptick in consumption and typically aids a positive momentum in crude oil prices.”

As the Memorial Day holiday heralds the commencement of the peak demand season in the United States, the world’s foremost oil consumer, the decision to maintain production cuts is poised to lend support to prices as consumption surges.

Daniel Hynes, senior commodity strategist at ANZ Bank, remarked on the robust holiday travel activity witnessed in the U.S., both on roads and in the air.

However, amidst the optimism surrounding the OPEC+ meeting, concerns over heightened tensions in the Gaza Strip added a geopolitical dimension to market dynamics.

Israeli tank advancements into the heart of the Rafah section fueled apprehensions about a potential escalation of conflict in the broader Middle East, a region critical to global oil supply.

Market participants also awaited the release of U.S. crude inventory data from the American Petroleum Institute later in the day, with preliminary expectations suggesting a decline of approximately 1.9 million barrels for the previous week.

Additionally, investor attention was drawn to forthcoming U.S. inflation data, set to influence expectations regarding Federal Reserve interest rate decisions and, consequently, impact oil prices.

The U.S. core Personal Consumption Expenditures Price Index report for April, scheduled for release on Friday, is projected to hold steady on a monthly basis.

Against this backdrop of anticipation and geopolitical tensions, the oil market navigates a landscape shaped by supply dynamics, demand prospects, and macroeconomic indicators, all of which converge to define the trajectory of oil prices in the coming days.

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Oil Revenue Decline Spurs South Sudan to Seek $250 Million IMF Assistance



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South Sudan is seeking $250 million in financing from the International Monetary Fund (IMF) to address its ongoing balance of payment challenges and stimulate economic growth.

The request comes in response to a significant decline in oil revenue, a crucial source of the nation’s income, following damage to a key pipeline.

The pipeline, which transports two-thirds of South Sudan’s crude oil, sustained damage in February.

Repairs have been delayed due to conflicts in neighboring Sudan, where the conduit passes through areas controlled by the army and the paramilitary Rapid Support Forces.

Also, a blockade on the Red Sea has further hampered oil exports, exacerbating the economic strain.

Bank of South Sudan Governor James Alic Garang, speaking at the African Development Bank’s annual meetings in Nairobi, emphasized the urgency of securing alternative financial support.

“We are facing severe challenges with our oil exports, which constitute about 90% of our revenue,” Garang said. “The impact on our economy is profound, reducing the volume of oil available for international markets and decreasing the hard currency inflow essential for meeting our obligations.”

Since 2020, South Sudan has received three rapid credit facilities from the IMF. These measures led to the initiation of a program monitoring with board involvement last year.

The first two reviews of this program were completed this month, with a third scheduled for November. After this, the government will seek the full quota of approximately $250 million.

Governor Garang highlighted that meeting the IMF’s policy requirements is crucial for securing the funds.

“We have already delivered an audit of the central bank’s financial statements for 2021,” he noted. “However, there are still areas where we need to intensify our efforts. With the IMF, there is no free lunch. We’re working very hard to meet those policy requirements.”

Efforts to increase non-oil revenue have been made, but they fall short of the country’s needs. The decline in oil production has significantly affected foreign exchange reserves, which can now only cover about two months of imports, compared to the IMF’s threshold of 3.5 months.

In addition to seeking IMF assistance, South Sudan is in discussions with Qatar for a resolution following a $1 billion court award to the Qatar National Bank over a defaulted loan. “We are negotiating to pay part of it, but we’ll still need to settle this debt,” Garang stated.

The $250 million from the IMF is expected to address several critical areas, including economic growth, inflation control, and the distribution of resources across the country.

It will also support essential sectors such as education and health, providing much-needed relief as South Sudan navigates through these economic challenges.

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Oil Prices Steady Ahead of Crucial OPEC+ Meeting on Output Cuts



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Oil prices stabilized in Asian trading on Monday as markets turned their attention to an upcoming OPEC+ meeting, where producers are expected to discuss maintaining voluntary output cuts for the remainder of the year.

This critical meeting, scheduled for June 2, will be held online following a brief postponement, OPEC announced last Friday.

The Brent crude oil, against which Nigerian crude oil is priced, stood at $82.36 a barrel, while the U.S. West Texas Intermediate (WTI) crude oil rose by 28 cents to $78 per barrel.

The stabilization in prices comes after a week of declines with Brent ending last week about 2% lower and WTI losing nearly 3%.

This downturn was influenced by minutes from the Federal Reserve’s recent meeting, revealing that some officials are open to further tightening interest rates if deemed necessary to control persistent inflation.

Market activity is expected to be relatively subdued on Monday due to public holidays in the United States and the United Kingdom.

However, anticipation is building around the OPEC+ meeting, where producers will deliberate on extending the current voluntary output cuts of 2.2 million barrels per day into the second half of the year. Sources within OPEC+ suggest that an extension is likely.

Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, expressed confidence in the potential extension, stating, “Oil futures are expected to maintain today’s gains due to expectations of the cuts being extended.”

She also highlighted the influence of upcoming U.S. Producer Price Index (PPI) data on market movements, which will shape the Federal Reserve’s approach to potential rate adjustments.

Combined with an additional 3.66 million barrels per day of production cuts valid through the end of the year, these measures account for nearly 6% of global oil demand.

OPEC remains optimistic about continued growth in oil demand, forecasting an increase of 2.25 million barrels per day for the year, while the International Energy Agency (IEA) anticipates slower growth of 1.2 million barrels per day.

Analysts at ANZ noted that they will be closely monitoring gasoline usage as the Northern Hemisphere enters summer, a peak season for driving holidays.

They commented, “While U.S. holiday trips are expected to hit a post-COVID high, improved fuel efficiency and EVs could see oil demand remain soft,” but added that this could be offset by rising air travel.

This week’s market dynamics will also be influenced by the U.S. personal consumption expenditures (PCE) index, due to be released on May 31.

The PCE index is regarded as the Federal Reserve’s preferred measure of inflation, and its findings could provide further indications of the central bank’s interest rate policies.

In a related development, Goldman Sachs has revised its forecast for 2030 oil demand upwards to 108.5 million barrels per day from the previous 106 million barrels per day.

The investment bank also projects peak oil demand to occur by 2034 at 110 million barrels per day, followed by a prolonged plateau until 2040.

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