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Manufacturers Suffer N30bn Revenue Decline in Three Months

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  • Manufacturers Suffer N30bn Revenue Decline in Three Months

The manufacturing sector recorded a decline of about N30bn in output in the first quarter of this year, figures obtained from the National Bureau of Statistics have revealed.

An analysis of the Gross Domestic Product report prepared by the NBS showed that the sector recorded a total output of N2.66tn at the end of the fourth quarter of 2017.

However, the level of productivity in the sector dropped by N30bn from the fourth quarter 2017 figure to N2.63tn in the first three months of this year.

The sector had been badly hit by the harsh operating environment, which took its toll on the profit margins of many companies operating in that segment of the economy.

There are 13 sub-sectors that make up the manufacturing sector.

Out of the 13 sub-sectors, five recorded increase in economic performance between December 2017 and March this year, while eight recorded decrease in productivity.

The five sub-sectors that recorded increase in economic performance are cement from N228.8bn in December to N251.8bn in March 2018; wood and woods products, from N78.85bn to N82.14bn; pulps and paper products, from N23.67bn to N23.77bn; non-metallic products, from N104.17bn to N110.21bn; and motor vehicle assembly, from N16.48bn to N19.64bn.

The sub-sectors that recorded decline in productivity include oil refining, from N42.69bn to N41.55bn; food, beverage and tobacco, from N1.21tn to N1.19tn; textile, apparel and footwear, from N642.55bn to N610.64bn; and chemical and pharmaceutical products, from N58.91bn to N55.23bn.

The rest are plastic and rubber products, from N84.59bn to N83.99bn; electrical and electronics, from N1.9bn to N1.4bn; iron and steel, from N66.68bn to N58.82bn; and other manufacturing, from N109.53bn to N105.93bn.

Speaking on the development, finance and economic experts said while the economy might have returned to positive growth, there were structural challenges that needed to be addressed so as to improve the momentum of the manufacturing sector.

For instance, they said that the structure of the economy had yet to be fully diversified, adding that high interest rates being charged by banks were affecting the productive capacity of the manufacturing sector.

A former Managing Director, Nigeria Deposit Insurance Corporation, Mr. Ganiyu Ogunleye, said, “The fact that we are out of recession doesn’t mean all is well as we still have some fundamental problems in our economy. The structure of the economy itself is a challenge, because you know that we have relied heavily on the oil sector and efforts are on to diversify the economy away from oil and that cannot happen overnight; it is going to take time.

“So, for us to sustain our economy, particularly now that we are out of recession, we have to focus on agriculture, which I believe can lead to food sufficiency, create a lot of jobs and can also provide raw materials for the industrial and manufacturing sectors.

“So, if we focus on agriculture, we will be able to sustain our economy on a long-term basis and the other sectors too, such as power, should also be given adequate attention by the government.”

The immediate past President, Abuja Chamber of Commerce and Industry, Mr. Tony Ejinkeonye, said while the manufacturing sector might have experienced challenging times due to foreign exchange scarcity, the recent policies of the government had started bringing back confidence in the economy.

He stated, “The subdued growth rate of the sectors of the economy with high job propensities in manufacturing, construction, trade, hospital and in general services indicate that growth is neither diversified nor broad-based.

“There is a need to avoid potential disruption to the economic growth momentum with a view to allowing the economy to grow sufficiently to create employment and recede inflation.

“There is a need to also allow the economy to find and settle at a new price and wage equilibrium level, give more time to the impact of the fiscal stimulus implemented by the Federal Government to consummate and enable diversified growth.”

The immediate past Director-General, Abuja Chamber of Commerce and Industry, Dr. Chijioke Ekechukwu, stated that the government needed to step up its diversification agenda.

He said while the government had been pursuing the economic diversification since the inception of this administration, the results had not been too impressive based on the recent GDP report released by the NBS.

Apart from agriculture, particularly crop production, he noted that oil was still the leader in terms of income to Nigeria.

To simulate the economy, Ekechukwu added that there was a need for more reforms to further reduce the cost of doing business and the interest rate.

Ekechukwu stated, “The country came out of recession as a result of an improved production capacity and improved international oil prices. These two major reasons are actually out of the control of the government and so achieving that feat cannot be said to be a better plus, because if that situation had not happened, it is possible that we won’t have been out of recession.

“The area we have to give commendation to government for is the area of curtailing the insecurity in the Niger Delta, because that was another major reason why we exited recession.”

He added, “In the area of growing the non-oil sector, we have yet to make any significant effort that can take the country to the path of sustainable growth. In fact, that is where I expect that the government should put a lot of efforts considering the decline in the GDP figure in the first quarter that was released two weeks ago.

“The non-oil sector, on its own, has the capability to drive the economy in case the price of oil that is not within our control starts declining. So, there is a need to put in more efforts in agricultural development, as well as boosting the export market and the manufacturing sector.”

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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South Africa’s Inflation Rate Holds Steady in May

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South Africa’s inflation rate remained unchanged in May, increasing the likelihood that the central bank will maintain current borrowing costs.

According to a statement released by Statistics South Africa on Wednesday, consumer prices rose by 5.2% year-on-year, the same rate as in April.

The consistent inflation rate is expected to influence the decision of the six-member monetary policy committee (MPC), which is set to meet in mid-July. The current benchmark rate stands at 8.25%, a 15-year high, and has been held steady for six consecutive meetings.

Central Bank Governor Lesetja Kganyago has repeatedly emphasized the need for inflation to fall firmly within the 3% to 6% target range before considering any reduction in borrowing costs.

“We will continue to deliver on our mandate, irrespective of how our post-election politics plays out,” Kganyago stated earlier this month in Soweto. “The only impact is what kind of policies any coalition will propose. If the policies are not sustainable, we might not have investment.”

While money markets are assigning a slim chance of a 25-basis point rate cut in July, they are fully pricing in a reduction by November.

Bloomberg Africa economist Yvonne Mhango anticipates the rate-cutting cycle to begin in the fourth quarter, supported by a sharp drop in gasoline prices in June and a rally in the rand.

The rand has appreciated more than 3% since Friday, following the ANC’s agreement to a power-sharing deal with business-friendly opposition parties and the re-election of President Cyril Ramaphosa.

In May, the annual inflation rates for four of the twelve product groups remained stable, including food and non-alcoholic beverages.

However, transport, alcoholic beverages and tobacco, and recreation and culture saw higher rates. Food prices increased by 4.3% in May, slightly down from 4.4% in April, while transport costs rose by 6.3%, up from 5.7% and marking the highest rate for this category since October 2023.

The central bank’s cautious stance on monetary policy reflects its ongoing concerns about inflation.

Governor Kganyago has consistently voiced worries that the inflation rate is not decreasing as quickly as desired. The MPC’s upcoming decision will hinge on sustained inflationary pressures and the need to balance economic stability with fostering growth.

As South Africa navigates its economic challenges, the steady inflation rate in May provides a measure of predictability for policymakers and investors alike.

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Ghana Reports Strong 4.7% GDP Growth in First Quarter of 2024

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Ghana’s economy showed impressive growth in the first quarter of 2024 with the Gross Domestic Product (GDP) expanding by 4.7% compared to the same period last year, according to Government Statistician Samuel Kobina Annim.

This represents an increase from the 3.8% growth recorded in the previous quarter and should provide a much-needed boost to the ruling New Patriotic Party (NPP) as the nation approaches the presidential elections scheduled for December 7.

The positive economic data comes amidst a challenging backdrop of fiscal consolidation efforts under a $3 billion International Monetary Fund (IMF) rescue program.

The government has been working to control debt through reduced spending and restructuring nearly all of its $44 billion debt.

This includes ongoing negotiations with private creditors to reorganize $13 billion worth of bonds.

The latest GDP figures are seen as a vindication of the NPP’s economic policies, which have been under fire from the main opposition party, the National Democratic Congress (NDC).

The opposition has criticized the government’s handling of the economy, particularly its fiscal policies and the terms of the IMF program, arguing that they have imposed undue hardship on ordinary Ghanaians.

However, the 4.7% growth rate suggests that the measures taken to stabilize the economy are beginning to yield positive results.

Analysts believe that the stronger-than-expected economic performance will bolster the NPP’s position as the country gears up for the presidential elections.

“The growth we are seeing is a testament to the resilience of the Ghanaian economy and the effectiveness of the government’s policies,” Annim stated at a press briefing in Accra. “Despite the constraints imposed by the debt restructuring and IMF program, we are seeing significant progress.”

The IMF program, which is designed to restore macroeconomic stability, has necessitated tough fiscal adjustments.

These include cutting government expenditure and implementing structural reforms aimed at boosting economic efficiency and growth.

The government’s commitment to these reforms has been crucial in securing the confidence of international lenders and investors.

In addition to the IMF support, the government has also been focused on diversifying the economy, reducing its reliance on commodities, and fostering sectors such as manufacturing, services, and technology.

These efforts have contributed to the robust growth figures reported for the first quarter.

Economic growth in Ghana has been uneven in recent years, with periods of rapid expansion often followed by slowdowns.

The current administration has emphasized sustainable and inclusive growth, seeking to ensure that the benefits of economic progress are widely shared across all segments of the population.

The next few months will be critical as the government continues its efforts to stabilize the economy while preparing for the upcoming elections.

The positive GDP growth figures provide a strong foundation, but challenges remain, including managing inflation, creating jobs, and ensuring the stability of the financial sector.

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World Bank Commits Over $15 Billion to Support Nigeria’s Economic Reforms

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The World Bank has pledged over $15 billion in technical advisory and financial support to help the country achieve sustainable economic prosperity.

This commitment, announced in a feature article titled “Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms,” underscores the international lender’s confidence in Nigeria’s recent bold reforms aimed at stabilizing and growing its economy.

The World Bank’s support will be channeled into key sectors such as reliable power and clean energy, girls’ education and women’s economic empowerment, climate adaptation and resilience, water and sanitation, and governance reforms.

The bank lauded Nigeria’s government for its courageous steps in implementing much-needed reforms, highlighting the unification of multiple official exchange rates, which has led to a market-determined official rate, and the phasing out of the costly gasoline subsidy.

“These reforms are crucial for Nigeria’s long-term economic health,” the World Bank stated. “The supply of foreign exchange has improved, benefiting businesses and consumers, while the gap between official and parallel market exchange rates has narrowed, enhancing transparency and curbing corrupt practices.”

The removal of the gasoline subsidy, which had cost the country over 8.6 trillion naira (US$22.2 billion) from 2019 to 2022, was particularly noted for its potential to redirect fiscal resources toward more impactful public investments.

The World Bank pointed out that the subsidy primarily benefited wealthier consumers and fostered black market activities, rather than aiding the poor.

The bank’s article emphasized that Nigeria is at a turning point, with macro-fiscal reforms expected to channel more resources into sectors critical for improving citizens’ lives.

The World Bank’s support is designed to sustain these reforms and expand social protection for the poor and vulnerable, aiming to put the economy back on a sustainable growth path.

In addition to this substantial support, the World Bank recently approved a $2.25 billion loan to Nigeria at a one percent interest rate to finance further fiscal reforms.

This includes $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing, and $750 million for the NG Accelerating Resource Mobilization Reforms Programme-for-Results (ARMOR).

“The future can be bright, and Nigeria can rise and serve as an example for the region on how macro-fiscal and governance reforms, along with continued investments in public goods, can accelerate growth and improve the lives of its citizens,” the World Bank concluded.

With this robust backing from the World Bank, Nigeria is well-positioned to tackle its economic challenges and embark on a path to sustained prosperity and development.

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