The U.S. Federal Reserve has raised interest rates by another 75 basis points following a 25 basis points increase in March to curtail the rising inflation rate and rein in escalating prices.
U.S. inflation rate rose to 8.6% in May, its highest in 40 years. The increase was a result of global uncertainty caused by Russia’s invasion of Ukraine and the supply disruption caused by the Covid-19 lockdown in China, the Fed stated in its press release obtained by Investors King.
The Fed, however, said the economy has rebounded from the first quarter decline with new job creation on the rise and the unemployment rate low. But noted that the increase in inflation rate in recent months was due to ‘supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.’
However, because the committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run, it agreed to raise the federal funds rate to 1‑1/2 to 1-3/4 percent and anticipates that ongoing increases in the target range will be appropriate.
The committee further stated it will continue to reduce its holdings of Treasury securities and agency debt and agency mortgage-backed securities as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that was issued in May.
“Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,” Powell said. He added, though, that he expects the July meeting to see an increase of 50 or 75 basis points. He said decisions will be made “meeting by meeting” and the Fed will “continue to communicate our intentions as clearly as we can.”
“We want to see progress. Inflation can’t go down until it flattens out,” Powell said. “If we don’t see progress … that could cause us to react. Soon enough, we will be seeing some progress.”
Manufacturing Sector Records 7.70% Quarter-on-Quarter Growth in Q4 2023
In the fourth quarter of 2023, Nigeria’s manufacturing sector grew by 7.70% year-on-year, according to the National Bureau of Statistics (NBS).
The surge in growth reflects a significant uptick from the preceding quarter and underscores the resilience of the manufacturing industry amid economic challenges.
This growth trajectory indicates positive momentum and signals potential opportunities for economic recovery and development.
The manufacturing sector, comprising thirteen key activities ranging from oil refining to motor vehicles and assembly, demonstrated notable dynamism across various subsectors.
This growth surge is attributed to increased production, enhanced operational efficiencies, and strategic investments across the manufacturing value chain.
Despite facing headwinds such as supply chain disruptions and regulatory uncertainties, the sector’s robust performance underscores its pivotal role in driving economic diversification, job creation, and industrialization efforts in Nigeria.
Moving forward, sustaining this growth momentum will require continued policy support, investment in infrastructure, and efforts to address key bottlenecks hindering the sector’s expansion.
By fostering an enabling business environment and promoting innovation and technology adoption, Nigeria’s manufacturing sector can further catalyze inclusive economic growth and contribute significantly to the nation’s development agenda.
Nigeria’s GDP Grows by 3.46% in Q4 2023, Driven by Services
Nigeria’s Gross Domestic Product (GDP) grew by 3.46% in the fourth quarter (Q4) of 2023 on the back of robust performance of the services sector, according to data released by the National Bureau of Statistics (NBS).
The GDP expansion though slightly lower than the 3.52% recorded in the same period of 2022, reflects a positive trajectory for the Nigerian economy amid ongoing challenges.
The growth rate surpassed the 2.54% recorded in the preceding quarter, indicating a rebound in economic activity.
The services sector emerged as the key driver of growth expanding by 3.98% and contributing 56.55% to the overall GDP.
This sector’s resilience underscores its pivotal role in Nigeria’s economic landscape, encompassing diverse industries such as telecommunications, finance, and real estate.
Also, the agriculture sector experienced growth, expanding by 2.10% compared to the same period in 2022.
Meanwhile, the industry sector recorded a notable improvement, growing by 3.86%, a stark contrast to the -0.94% contraction observed in the fourth quarter of 2022.
On an annual basis, Nigeria’s GDP expanded by 2.74% in 2023 compared to 3.10% in the previous year, reflecting sustained but moderated growth.
The positive trajectory in GDP growth reflects resilience in the face of various economic challenges.
However, sustaining and accelerating growth will require continued efforts to address structural bottlenecks, foster investment, and promote inclusive economic policies across sectors.
Nigeria’s Oil Sector Growth
During the fourth quarter of 2023, Nigeria’s oil sector posted a real growth rate of 12.11% year-on-year, signifying a significant improvement from previous periods.
This was driven by the surge in average daily oil production to 1.55 million barrels per day (mbpd), a positive shift in the sector’s performance.
Despite challenges such as global market fluctuations and production constraints, the oil sector contributed 4.70% to the nation’s total real GDP in Q4 2023.
Nigeria’s Non-Oil Sector
Nigeria’s non-oil sector sustained growth momentum, posting a 3.07% real growth rate in Q4 2023.
This growth was primarily attributed to key industries including finance, telecommunications, agriculture, manufacturing, and construction.
Accounting for 95.30% of the nation’s GDP in the same quarter, the non-oil sector continues to drive economic diversification efforts and reduce dependence on oil revenues.
Despite facing challenges, such as infrastructure deficits and regulatory bottlenecks, the sector’s resilience underscores its pivotal role in fostering sustainable economic development and inclusive growth agendas.
Senate Rejects Ministry of Power’s Proposed Electricity Tariff Hikes
The Nigerian Senate has firmly opposed the Ministry of Power’s proposed electricity tariff hikes, emphasizing the need to alleviate the burden on citizens amidst prevailing economic hardships.
The rejection comes as a response to the Ministry’s consideration of increasing electricity tariffs and removing subsidies in the face of escalating economic challenges across the nation.
During a recent plenary session, Senator Aminu Abbas moved a motion urging the Senate to retain electricity subsidies to mitigate the impact of rising living costs on Nigerians.
The motion garnered unanimous support, with senators expressing concerns over the implications of tariff hikes on an already financially strained populace.
The Senate’s resolution also directed the Committee on Power to conduct a comprehensive investigation into the N2 trillion required for electricity subsidy payments, outstanding debts within the sector, and the state of metering nationwide.
This decision reflects the Senate’s commitment to ensuring transparency and accountability in the power sector’s financial management.
The rejection underscores the Senate’s stance against policies that could exacerbate the financial burdens faced by Nigerian citizens.
The move aligns with the Senate’s broader efforts to prioritize the welfare of the populace and advocate for measures that promote economic stability and affordability.
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