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Nigeria’s Economic Outlook for 2019

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  • Nigeria’s Economic Outlook for 2019

Nigeria’s economic outlook remains challenging in 2019 as investment inflows and revenue generation are projected to drop further in the new year.

The economy grew at 1.81 percent in the third quarter of 2018 after a 1.5 percent expansion in the second quarter but the unemployment rate rose to 23.1 percent from 18.8 percent recorded a year ago. A sign the economy is merely sustaining growth after recovering from the recession in 2017.

Despite growing for six consecutive quarters, new job creation is almost nonexisting and interest rate remained unchanged at 14 percent. Still, the manufacturing sector recorded growth for the 18th consecutive month without new jobs or substantial new entrants to broaden growth.

One of the key factors in measuring the healthiness of an economy, the stock exchange market, returned -15.39 percent in 2018 while the national foreign reserves dropped to $43 billion on weak capital importation.

Rising interest rates in developed economies will continue to hurt capital inflow into emerging markets like Nigeria in 2019, especially with the European Central Bank likely to raise rates in the new year after announcing an end to its asset-buying program.

Global Economy and Impacts in 2019

The trade war between the U.S and China, the two world’s largest economies, should slow down global growth in 2019 but as China continues to adjust its policy to accommodate U.S. demands for an open market, global growth should pick up and expand at about 3.5 percent in 2019, down from 3.7 percent in 2018.

While the four rate hikes in the United States, the two from the United Kingdom since the recession and Canada’s five times rate increase since summer of 2017 boosted capital outflows from Nigeria and other emerging economies in 2018. The trend is expected to continue in the first half of 2019 but into the Euro-area ahead of the European Central Bank rate increase.

Global oil market remains largely uncertain in 2019 due to the projected slow down in China’s economy, the world’s largest importer of crude oil. But with Saudi Arabia and Russia led OPEC+ recent accord to cut production by 1.2 million barrels a day, Brent crude may average $70 a barrel in the first half, however, that should fade in the second half of the year as U.S. producers sustain output at about 12 million barrels a day.

Nigeria’s Economy 2019

Employment/Unemployment

The labour market remained weak with low new job creation and shrinking existing jobs, the trend is expected to continue in 2019 and up until the second half of 2020 when new policies would have crystalised and interest rate lowered.

The Central Bank of Nigeria left interest rate unchanged at 14 percent, citing weak investment inflow and rising consumer prices. But with Dangote refinery scheduled to commence operation in 2020, the CBN would have more liquidity to stimulate growth and lower interest rates enough to support new jobs.

Therefore, the unemployment rate is projected to increase from the current 23.1 percent in 2018 to 25 percent by the third quarter of 2019 and start moderating by the second half of 2020.

Gross Domestic Product

OPEC+ production cuts and weak capital inflows will weigh on Nigeria’s economic productivity in 2019. Nigeria’s oil production is expected to be capped at 1.685 million barrels a day in 2019, this should reduce foreign revenue generation and impact Central Bank of Nigeria’s forex intervention program that has sustained economic activities in the last two years.

Despite crude oil production rising to 2.09 million barrels a day in 2018, growth remained lackluster with 20.9 million unemployed people and 43.3 percent national unemployment and underemployment rate. At a lower production level with a drop in investment inflow and high capital outflow, economic productivity is projected to slow down in the first half of 2019 and remained largely unchanged in the second half of the year when new administration would have been sworn-in.

Also, investment inflow and market sentiment are expected to start picking up by the second half of the year when implementation of the 2019 budget would have commenced.

However, analysts at Investors King Limited said: “The problem with the 2019 budget is that 71.34 percent of the 2019 budget will be spent on recurrent expenditure, 18 percent higher than 2018 budget. While non-oil revenue is expected to rise by just 0.1 percent in 2019.”

“In an economy that is likely to experience a drop in revenue in 2019 due to OPEC+ production cuts agreement, weak revenue generation amid huge capital expenditure that over the years has failed to stimulate new job creation and enhance economic productivity is the number one problem of the 2019 proposed budget.”

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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Economy

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

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Ghana one cedi - Investors King

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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Economy

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

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world bank - Investors King

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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Economy

Nigeria’s Food Inflation Hits 40.66% Year-on-Year in May 2024

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Nigeria's Inflation Rate - Investors King

Nigeria’s food inflation rate surged to 40.66% on a year-on-year basis in May 2024, a significant increase from 24.82% recorded in May 2023.

The latest figures from the National Bureau of Statistics (NBS) highlight the rising cost of essential food items, exacerbating the economic challenges faced by many Nigerians.

The NBS report attributes the steep rise in food inflation to substantial price increases in several staple items.

Notably, the prices of Semovita, Oatflake, Yam flour, Garri, and Beans saw considerable hikes.

In addition, the cost of Irish Potatoes, Yams, Water Yam, Palm Oil, and Vegetable Oil also climbed significantly. Within the protein category, Stockfish, Mudfish, Crayfish, Beef, Chicken, Pork, and Bush Meat experienced notable price jumps.

The month-on-month food inflation rate in May 2024 was 2.28%, reflecting a slight decrease of 0.22 percentage points from the 2.50% recorded in April 2024.

This month-to-month decline was due to a slower rate of price increases for Palm Oil, Groundnut Oil, Yam, Irish Potatoes, Cassava Tuber, Wine, Bournvita, Milo, and Nescafe.

Despite the minor monthly decrease, the average annual food inflation rate for the twelve months ending May 2024 was 34.06%.

This marks a significant rise of 10.41 percentage points from the average annual rate of 23.65% recorded in May 2023.

The sharp rise in food inflation is raising concerns among economic analysts and policymakers, as it significantly impacts the cost of living for Nigerians.

The rising food prices are straining household budgets and contributing to an overall inflation rate that threatens economic stability.

In response to the inflationary pressures, the Nigerian government and relevant stakeholders are being urged to implement effective measures to stabilize food prices and address the underlying causes of inflation.

Efforts to boost agricultural productivity, improve supply chains, and tackle market inefficiencies are seen as critical to mitigating the inflationary trend.

The NBS report underscores the urgent need for comprehensive strategies to manage inflation and ensure food security for the population.

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