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Nigerian Economy Expands at Slower Pace of 1.87% in Q1, 2020

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  • Nigerian Economy Expands at Slower Pace of 1.87% in Q1, 2020

Nigerian economy grew at a slower pace in the first quarter of the year as the negative impacts of global disruptions have started crystalising in Africa’s largest economy.

The disruption in global economy due to the coronavirus pandemic resulted in a sharp fall in global oil prices and weighed on economic activities towards the end of the quarter after the nation recorded its index case in February.

According to the National Bureau of Statistics (NBS), Nigeria’s Gross Domestic Product (GDP) expanded by 1.87 percent year-on-year in the first quarter (Q1) of 2020. This was 0.23 percent lower than the pace of growth recorded in Q1 2019 and 0.68 percent below the final quarter of 2019.

Q1 2019 Q2 2109 Q3 2019 Q4 2019 Total Q1 2020
CONTRIBUTION TO GDP
AGRICULTURE 21.89 22.78 29.25 26.09 25.16 21.96
INDUSTRIES 23.56 23.34 22.17 20.27 22.25 23.65
SERVICES 54.55 53.87 48.59 53.64 52.60 54.39
100.00 100.00 100.00 100.00 100.00 100.00
NON OIL  90.78 91.02 90.23 92.68 91.22 90.50
OIL  9.22 8.98 9.77 7.32 8.78 9.50
100.00 100.00 100.00 100.00 100.00 100.00
GROWTH
AGRICULTURE 3.17 1.79 2.28 2.31 2.36 2.20
INDUSTRIES 0.42 2.84 3.21 2.75 2.31 2.26
SERVICES 2.41 1.94 1.87 2.60 2.22 1.57
REAL GROWTH RATE AT BASIC PRICE 2.10 2.12 2.28 2.55 2.27 1.87
REAL GROWTH RATE AT MARKET PRICE 2.06 2.14 2.14 2.46 2.21 1.95
NON OIL GROWTH RATE 2.47 1.64 1.85 2.26 2.06 1.55
OIL GROWTH RATE -1.46 7.17 6.49 6.36 4.59 5.06

On a quarterly basis, the real GDP contracted by 14.27 percent when compared with the 5.59 percent growth rate recorded in the preceding quarter. This, the bureau attributed to the effects of the disruption in global supplies, especially in the non-oil sector of the economy.

In the quarter, aggregate GDP rose to N35,647,406.08 million with a growth rate of 12.01 percent in nominal terms. This was better than the N31,824,349.67 million reported in the first quarter of 2019 and 0.11 percent higher than the nominal growth rate but 0.32 percent lower than the preceding quarter.

Oil Sector

In the first quarter, Nigeria produced 2.07 million barrels per day, more than the 1.99 mbpd recorded in Q1, 2019 and 0.06 mbpd higher than the fourth quarter of 2019.

Accordingly, the sector expanded by 5.06 percent year-on-year in the first quarter, an increase of 6.51 percent when compared to the corresponding quarter of 2019. Growth, however, decreased by 1.30 percent when compared with Q4 2019.

On a quarterly basis, the sector grew by 11.30 percent in the first quarter, contributing 9.50 percent to aggregate real GDP. Higher than the percentage contributed in the first quarter of 2019 as the share of the non-oil sector declined due to the COVID-19 pandemic.

Non-oil Sector

The uncertainty surrounding the global economy weighed on the non-oil sector in the first quarter as the sector grew by 1.55 percent in real terms. This was 0.93 percent slowed than the rated filed for the same quarter of 2019 and 0.72 percent slower than the fourth quarter of 2019.

The sector was mainly driven by Information and Communication (Telecommunications), Financial and Insurance (Financial Institutions), Agriculture (Crop Production), Mining and Quarrying (Crude Petroleum & Natural Gas), and Construction, the NBS stated.

In real terms, the sector accounted for 90.50 percent of Nigeria’s GDP in the first quarter, slightly below the 90.78 percent and 92.68 percent recorded in the first quarter and fourth quarter of last year respectively.

It should be noted that while the report reflects the negative impact of COVID-19, it did not capture the full impact on the economy as COVID-19 broke out in Nigeria on February 27 and lockdown was announced in the last week of March. Therefore, the second quarter report would likely contract as economic activities were down most of the quarter.

 

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

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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