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COVID-19, Poor Economic Policy Plunge Nigeria Into Second Economic Recession in Four Years

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Lagos Nigeria - Investors King

Poor economic policy amid COVID-19 pandemic has plunged Nigeria into second economic recession in four years, according to the latest report from the Nigerian Bureau of Statistics (NBS).

Africa’s largest economy contracted by 3.62 percent year-on-year in real terms in the third quarter of 2020, this was 2.48 percent better than the second quarter.

Nigeria’s economy shrinks by 6.10 percent in the second quarter, bringing its cumulative decline in the last two quarters to 9.72 percent, the worst of such contraction since 1987.

After two consecutive quarters of negative growth, Nigeria officially plunged into the second economic recession in four years in the third quarter of 2020.

A further breakdown revealed that the third-quarter growth rate was slower by 5.90 percent when compared to the 2.28 percent positive growth recorded in the same quarter of 2019.

NBS attributed the decline to COVID-19 lockdown and other measures put in place in the second quarter to contain the spread of COVID-19. This, the bureau said was evident in the numbers of economic activities that recorded positive (18) growth in the third quarter when compared to the second quarter (13).

The performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the COVID-19 pandemic. As these restrictions were lifted, businesses re-opened and international travel and trading activities resumed, some economic activities have returned to positive growth. A total of 18 economic activities recorded positive growth in Q3 2020, compared to 13 activities in Q2 2020,” NBS stated.

During the third quarter, aggregate Gross Domestic Product (GDP) stood at N39,089,460.61 million in nominal terms. Representing an increase of 3.39 percent when compared with the N37,806,921.41 million recorded in the same period of 2019.

Oil Sector

In the third quarter, Nigeria’s daily crude oil production stood at 1.67 million barrels per day or 0.37mbpd lower than the same quarter of 2019 and 0.14mbpd lower than the production attained in the second quarter of 2020. Suggesting that OPEC and allies’ accord signed to artificially boost oil prices is having a negative impact on Nigeria’s output.

Therefore, the oil sector contracted by 13.89 percent year-on-year in the third quarter, representing a decline of 20.38 percent when compared with the same quarter of 2019.

Accordingly, real oil growth decreased by 7.26 percent in the quarter under review, down from 6.6 percent growth recorded in the second quarter of 2020.  However, on a quarterly basis, the sector expanded by 9.64 percent in the third quarter of 2020. Contributing 8.79 percent to total GDP, down from 9.77 percent recorded in the corresponding period of 2019 and 8.93 percent in the preceding quarter.

Non-Oil Sector

As expected, the non-oil sector performed better in the third quarter. Contracting by 2.51 percent in real time, a decline of 4.36 percent from the same quarter of 2019 and 3.54 percent better than the second quarter of 2020. The sector was driven mainly by the Information and Communication (Telecommunications) sector, with other drivers being Agriculture (Crop Production), Construction, Financial and Insurance (Financial Institutions), and Public Administration.

The non-oil sector contributed 91.27 percent to the nation’s GDP in the third quarter of 2020, higher than the 90.23 percent posted in the corresponding quarter of 2019 and 91.07 percent in the second quarter of 2020.

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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