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Nigeria Economic Growth to Slow Down to 2.7% in 2023, Forecasts GlobalData

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Decline in oil production, insecurity ahead of 2023 general elections and high inflationary pressure remain the major areas of concern for Nigeria.

Against this backdrop, the real GDP growth of the country is forecast to slow down from 3% in 2022 to 2.7% in 2023, reveals GlobalData, a leading data and analytics company.

GlobalData’s latest report, “Macroeconomic Outlook Report: Nigeria,” reveals that broadening inflationary pressure had triggered a cost-of-living crisis. Inflation rate is projected to further rise to 19.2% in 2023 from 19.1% in 2022. According to the National Bureau of Statistics, Multidimensional Poverty Index Survey (2022), as of 17 November 2022, 133 million people, equivalent to 63% of the nation’s population, were experiencing multidimensional poverty in the country.

Nigeria is categorized as a high-risk nation and ranks 133rd out of 153 nations in GlobalData Country Risk Index (GCRI Q3 2022). The country’s risk score is higher in the parameters of political environment, macroeconomic, social, technological, and environmental risk when compared to the average of Middle East and African nations.

Puja Tiwari, Economic Research Analyst at GlobalData, comments: “Nigeria’s oil output rose to 1.4 billion barrels per day (bpd) in December 2022 from below one bpd in August 2022, according to Nigerian Upstream Petroleum Regulatory Commission. However, it is significantly below what it was last decade ago (above two million bpd). Oil theft and prolonged repair work at Forcados, a key oil terminal which is expected to continue till September 2023, will result in Nigeria’s under production of crude oil in 2023. Meanwhile, the violent attacks on the election commission offices raise questions on the security in the country ahead of elections.”

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According to GlobalData, agriculture, industry and services sectors contributed 23.6%, 32.2% and 44.2%, respectively, to the gross values added (GVA) in 2022. The three sectors are forecast to grow by 12.2%, 14% and 12.2% in 2023, compared to 13%, 14.9% and 12.9%, respectively, in 2022.

In October 2022, the country allocated a budget of NGN20.5 trillion ($51.5 billion) for the 2023 fiscal year, of which more than 60% will be used to finance debt repayments. This will curtail the expenditure on other developmental sectors.

The naira per US dollar depreciated by 8.7% year-on-year on 2 January 2023. Furthermore, GlobalData estimates the exchange rate to depreciate to NGN420.6 per $ in 2023 from 415.3 per $ in 2022. Nigeria’s foreign exchange (forex) remained depressed amid the dwindling crude oil production and lower exports revenue.

Tiwari concludes: “Introducing measures to reduce poverty as well as monetary measures to curb the mounting prices continue to be the need of the hour for the Nigerian economy. Moreover, the government also needs to work towards policies to control rising gross debt, depreciating currency, and increasing unemployment to reactivate the economy.”

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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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