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Green Shoots in the Non-oil Economy – Coronation Merchant Bank



Non oil

The latest national accounts released by the National Bureau of Statistics (NBS) show that GDP grew by 4.0% y/y in Q3 ’21 compared with 5.0% y/y recorded in Q2 ’21.

This growth can be partly attributed to positive base effects, steady progress in stemming the spread of the coronavirus and resumption of economic/business activity. The oil economy contracted by -10.7% y/y in Q3 ‘21 compared with a contraction of -12.7% y/y recorded in Q2 ’21. Meanwhile, the non-oil economy grew by 5.4% y/y compared with 6.7% y/y recorded in Q2 ‘21.

In our chart, we highlight the top seven performing sectors in the non-oil economy, among those accounting for at least 1% of GDP.

The best performer was the finance and insurance sector which posted a growth rate of 23.2% y/y compared with a contraction of -2.5% y/y recorded in Q2 ’21. Meanwhile, within the sector, the financial institutions segment grew by 25.5% y/y compared with a contraction of -4.5% y/y in Q2 ‘21. This healthy improvement is also reflected in the strong performance of tier 1 banks as seen in their respective Q3 ’21 earnings report.

The second-best performer was the transportation and storage sector which grew by 20.6% y/y compared to 76.8% y/y posted in Q2 ’21. The sector contributed 1.0% to GDP. The major drivers of the sector were rail transport segment (59.9% y/y) and air transport segment (33.3% y/y). This was largely due to positive base effects and improvements in air and rail passenger traffic as global economies lifted lockdown measures. Road transport, which makes up 79% of the entire sector, grew by 21.1% y/y.

The trade sector grew by 11.9% y/y in Q3 ‘21 compared with 22.5% y/y recorded in the previous sector. The sector contributed 14.9% to GDP. We suspect that the release of pentup demand, particularly for consumers within the middle-income bracket may have supported trade activities.

The information and communications sector grew by 9.7% y/y in Q3 ’21 compared with 5.6% recorded in Q2 ‘21. Its major contributor, telecommunications, posted a growth rate of 10.9% y/y compared with 5.9% y/y recorded in the previous quarter. This expansion is mainly due to an increase in demand for voice, data, and digital services.

Additionally, entertainment via streaming services has picked up significantly and contributed to the segment’s growth.

The manufacturing sector grew by 4.3% y/y in Q3 ’21 compared with 3.5% y/y recorded in Q2 ’21. The sector contributed 9.0% to total GDP. Growth was significant in the chemical and pharmaceutical products segment (10.0% y/y), due to sustained demand for pharmaceutical products by the health sector. Its largest segment, food, beverages, and tobacco grew by 6.1% y/y, and the cement segment expanded by 5.7% y/y in Q3 ’21.

The African Continental Free Trade Area (AfCFTA) is expected to impact domestic manufacturing positively. However, to maximise the benefits of the agreement, local manufacturers need to significantly improve their service delivery and product standards.

The construction and real estate sectors grew by 4.1% y/y and 2.3% y/y in Q3 ’21 respectively. The growth registered in both sectors could be attributed to development activities on the back of recommencement of delayed projects which were paused due to the slowdown triggered by the pandemic. The World Bank has estimated that Nigeria would need to invest USD3trn in infrastructure to reduce the infrastructure deficit in the country.

Based on the FGN’s 2022 budget proposal, N5.4trn (USD12.9bn) has been earmarked for capital expenditure. From this allocation, N1.5trn has been set aside for expenses on infrastructure. This includes provisions for works and housing, power, transport, water resources and aviation.

Looking ahead, we expect growth of 1.5% y/y in Q4 ’21

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Inflation and Forex Mismanagement Drive Petrol Truck Prices from N7M to N25M



Petrol Importation -

The Chairman of the Independent Petroleum Marketers Association of Nigeria in the Satellite Depot branch, Akin Akinrinade, has raised an alarm over the rising cost of petrol trucks in Nigeria.

According to Akinrinade, the cost of a petrol truck has surged from N7 million in May to an astonishing N25 million at present, attributed to inflation induced by poorly managed foreign exchange rates.

Akinrinade pointed out that the forex mismanagement has significantly impacted the landing cost of premium motor spirit (PMS), commonly known as petrol, consequently leading to a surge in pump prices.

The unstable business environment, coupled with the astronomical rise in expenses, has created challenges for marketers in the downstream oil sector.

Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), highlighted in October 2023 that foreign exchange challenges have hindered private companies from importing petroleum products.

As a result, the NNPCL has become the exclusive importer of petrol.

The decision to limit private entities from importing fuel comes after President Bola Tinubu’s initiatives aimed at deregulating the fuel market.

Initially, the plan was to allow private companies to import fuel starting June 2023, aligning with efforts to balance the market after removing petrol subsidies.

The ripple effects of the soaring petrol costs are already evident, with commercial transporters increasing fares, and private car owners seeking fuel-saving alternatives.

As Christmas approaches, the surge in demand for interstate travel is expected to further elevate costs, posing financial challenges for many Nigerians amidst stagnant income levels.

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Nigeria’s Presidential CNG Initiative Allocates N100bn for CNG Buses and EV Adoption




The Presidential Compressed Natural Gas (CNG) Initiative has allocated N100 billion to expedite the deployment of CNG buses nationwide, according to a statement released on Wednesday.

The initiative, designed to catalyze an Auto-gas and Electric Vehicle (EV) revolution in mass transit and transportation, aims to enhance sustainability and cost-effectiveness.

The statement revealed that the fund would be instrumental in supporting the adoption of auto-gas and electric vehicles, signaling a commitment to a more sustainable and economical future in the transportation sector.

The Presidential CNG Initiative plans to leverage over 11,500 CNG and electric-fueled vehicles, along with the deployment of 55,000 conversion kits.

This strategic approach is intended to reduce transportation costs for Nigerians and mitigate the challenges posed by the rising cost of living.

Under the Renewed Hope Agenda, the Presidential CNG Initiative is dedicated to realizing the President’s vision, guided by its steering committee led by FIRS Chairman Zacch Adedeji.

The statement highlighted recent achievements, including strategic technical partnerships and the ongoing commissioning of CNG Conversion centers in key states such as Lagos, Abuja, Kaduna, Ogun, and Rivers.

Several more centers are slated for commissioning in the coming weeks, reflecting the initiative’s momentum and commitment to achieving its objectives.

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Nigeria’s Power Transformation: 53 Projects Worth N122bn on Track for May 2024 Completion



power project

The Central Bank of Nigeria (CBN), in collaboration with the Transmission Company of Nigeria (TCN) and power distribution companies, is set to complete 53 power projects by May next year.

Valued at N122 billion, these projects aim to add over 1,000 megawatts to TCN’s wheeling capacity.

During a recent tour of three ongoing projects in Lagos, TCN’s Programme Coordinator, Mathew Ajibade, assured that the projects were not abandoned, refuting speculations.

He confirmed that work is progressing smoothly and is expected to be completed by May 2024, as initially planned.

Assistant Director/Head of Infrastructure Finance Office at the CBN, Tumba Tijani, highlighted the CBN’s support for the power sector, revealing that the bank released a loan at a 9% interest rate in August last year for the projects.

The funding, part of the Nigeria Electricity Market Stabilisation Facility-3, amounts to N122,289,344 and aims to address transmission/distribution bottlenecks, enhance supply to end-users, and unlock unutilized generation capacity.

Tijani disclosed that N85.43 billion has been disbursed into the Advance Payment Guarantee account of the 53 contractors responsible for executing the projects.

The comprehensive project list includes the delivery of power transformers, re-conductoring existing transmission lines, upgrading existing substations, and constructing 33KV line bays.

The initiative reflects a concerted effort to enhance Nigeria’s power infrastructure and meet growing energy demands.

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