- FSDH Foresees 3.16% GDP Growth for Nigeria in 2018
Analysts at FSDH Merchant Bank have estimated a real Gross Domestic Product (GDP) growth rate of 3.16 per cent for Nigeria in 2018.
In addition, the Lagos-based firm also projected an ambitious growth rate of 4.09 per cent for the country in 2019.
FSDH Merchant Bank made the forecasts in its 2018 economic projection that was obtained on Monday.
Although the fourth quarter 2017 GDP figures are yet to be released by the National Bureau of Statistics (NBS), the Nigerian economy had grown by 1.4 per cent in the third quarter (Q3) of 2017, effectively doubling the revised growth rate of 0.72 per cent recorded in the second quarter of the year.
The Q3 GDP figures was the second consecutive growth since the economy exited the recession in the second quarter of 2017. The growth rate then was 3.74 percentage points higher than the rate recorded in the corresponding quarter of 2016 (-2.34 per cent) and higher by 0.68 percentage points than the GDP growth rate recorded in the preceding quarter (Q2 2017), having been revised by the statistical agency to 0.72 per cent, from 0.55 per cent.
The FSDH Merchant Bank forecast for 2018 was slightly higher than the forecast of the World Bank and International Monetary Fund (IMF) of 2.5 per cent and 2.1 per cent respectively.
However, the firm explained in its latest report that with the population growing at 2.75 per cent, the country requires growth rate in excess of five per cent to substantially improve the well-being of Nigerians.
“Agriculture, Trade, and Mining & Quarrying sectors, with forecast growth rates of four per cent, two per cent and 3.2 per cent would drive the 3.16 per cent growth rate in 2018. Other leading sectors of the economy that would contribute to the growth are: Information and Communication (I&C): 2.2 per cent; Real Estate: 2.5 per cent; Construction: four per cent and Manufacturing: one per cent.
“Agriculture, with a growth of 3.06 per cent; Mining and Quarrying: 25.44 per cent and Other Services: 1.72 per cent were the three leading sectors that contributed to the growth rate of 1.40 per cent recorded in Q3 2017,” it added.
It noted that the increase in the supply of foreign exchange has improved economic activities across other sectors of the Nigerian economy.
FSDH Research stated that it had observed increased activities in Agriculture, Mining and Quarrying (oil and gas), manufacturing, Trade, Real Estate and I&C in the last few months, adding that thegrowth in the equity market has created additional wealth that would stimulate effective demand in the economy.
“Some light manufacturing activities are also taking place – stimulating demand for raw materials from Agriculture. The current oil price will encourage investment activities in the oil and gas sector. Trade sector would also benefit from the increase in consumer purchasing power
“FSDH Research notes that there are downside risks to the forecast growth. The rising social unrest in some parts of the country may affect economic activities and lead to escalating inflation rate. A significant drop in oil price may also have negative impact on the growth prospect.
“FSDH Research will highlight the implications of the GDP growth forecast on businesses and financial market in our next week article,”
The IMF had explained in its World Economic Outlook released Monday that the pick up of growth Africa (from 2.7 percent in 2017 to 3.3 percent in 2018 and 3.5 percent in 2019) was broadly as anticipated, with a modest upgrade to the growth forecast for Nigeria but more subdued growth prospects in South Africa, where growth was expected to remain below one per cent in 2018–19, as increased political uncertainty weighs on confidence and investment.
Also, the IMF stated that fiscal policy was generally constrained by the need to gradually rebuild buffers, especially in commodity-dependent emerging market and developing economies. With the recent respite provided by the cyclical rebound in commodity prices, it urged policymakers to guard against the temptation to defer reforms and budgetary adjustments for later.
“The policy challenges for low-income countries are particularly complex, as they involve multiple, sometimes conflicting goals. These include supporting near-term activity; diversifying their economies and lifting potential output to maintain progress toward their Sustainable Development Goals; building buffers to enhance resilience, especially in commodity-dependent economies grappling with a subdued outlook,” it stated.
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.
OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.
Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”
Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.
Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.
Experts have started predicting $75 a barrel by April.
“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”
Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin
Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges
Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.
The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.
The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.
“We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.
Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.
Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.
In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.
The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.
Oil Prices Extend Gains to $64.32 Ahead of OPEC+ Meeting
Oil Prices Rise to $64.32 Amid Expected Output Extension
Oil prices extended gains during the early hours of Thursday trading session amid the possibility that OPEC+ producers might not increase output at a key meeting scheduled for later in the day and the drop in U.S refining.
Brent crude oil, against which Nigeria oil is priced, gained 0.4 percent or 27 cents to $64.32 per barrel as at 7:32 am Nigerian time on Thursday. While the U.S West Texas Intermediate gained 19 cents or 0.3 percent to $61.47 a barrel.
“Prices hinge on Russia’s and Saudi Arabia’s preference to add more crude oil production,” said Stephen Innes, global market strategist at Axi. “Perhaps more interesting is the lack of U.S. shale response to the higher crude oil prices, which is favourable for higher prices.”
The Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, are looking to extend production cuts into April against expected output increase due to the fragile state of the global oil market.
Oil traders and businesses had been expecting the oil cartel to ease production by around 500,000 barrels per day since January 2021 but because of the coronavirus risk and rising global uncertainties, OPEC+ was forced to role-over production cuts until March. Experts now expect that this could be extended to April given the global situation.
“OPEC+ is currently meeting to discuss its current supply agreement. This raised the spectre of a rollover in supply cuts, which also buoyed the market,” ANZ said in a report.
Meanwhile, U.S crude oil inventories rose by more than a record 21 million barrels last week as refining plunged to a record-low amid Texas weather that knocked out power from homes.
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