Nigeria Business & Finance Updates

Nigeria’s resilience may raise GDP to 2.5% in Q4

As the 2.3 per cent growth in GDP for the third quarter of the year was adjudged the second-highest since 2016, the Central Bank of Nigeria (CBN) has given assurance that more commitment will raise the GDP to 2.5 per cent before the year runs out.

According to its governor, Godwin Emefiele, “with continued efforts at driving indigenous production in high-impact real sector activities, especially agriculture and manufacturing, as well as our efforts in improving access to credit, GDP growth is expected to pick-up in the last quarter of 2019. This will be buoyed by the anticipated budgetary spending in the near-term. From 2.28 percent in quarter three of 2019, growth is projected to quicken to 2.5 percent by the fourth quarter of 2019.”

This  Q3 effort was hailed by analyst as uncommon resilience against global risks. A Senior analyst with FXTM, Lukman Otunuga, “given how this rate of growth represents the second-highest quarterly rate witnessed since 2016. Nigeria is certainly displaying a measure of resilience against domestic and external headwinds.”

He explains: “Looking deeper into the GDP report, growth was mainly driven by strengthening momentum in the non-oil sector of the economy which highlighted Nigeria’s mission to diversify away from oil reliance. The non-oil sector of the economy expanded 1.85 per cent annually compared to the 1.6 per cent witnessed during the second half of 2019. However, growth in the oil sector also played a role, growing 6.5 per cent over the same period last year. Nigeria recorded an increase in its oil production to 2.04 million barrels a day in Q3 which was above the OPEC limit of 1.774 million barrels a day. If the nation is forced to comply with the quota during the final quarter of 2019 and early parts of 2020, this could hit economic growth. Although the government remains on a quest to diversify its revenue sources, crude oil still accounts for 90 per cent of export earnings and over 70 per cent of government revenues.

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“While economic activity is projected to shift into higher gear in 2020 as the new minimum wage hike stimulates consumption which accounts for 80 per cent of GDP, the nation still remains exposed to heightened global risks. Given how the projected economic growth of 2.3 per cent is below the 2.6 per cent population growth, the GDP per capita risks declining further.”

However, explaining its trajectory, Emefiele said:

“GDP Growth has remained positive for 10 consecutive quarters following the recession. For the 2nd and 3rd Quarter of 2019, GDP growth stood at 2.1 percent and 2.28 percent respectively. The positive growth in GDP has been driven by improvements in Agriculture, Oil and Gas, Manufacturing and ICT. Activities in the manufacturing sector also witnessed significant improvement as the Primary Manufacturing Index has risen for 31 consecutive months, from its low of 42 points in August 2016 to 57.6 points in September 2019. This development is attributable  to the series of intervention programs by the CBN, along with sustained supply of foreign exchange and stability of the naira. Notwithstanding these positive indicators, I will be the first to highlight that we are still very far from our potential. First, our GDP growth rate which stood at 2.28 percent in the 3rdquarter of 2019 still remains below our estimated annual population growth of 2.6 percent. In order to make sufficient progress on a per capita basis, our GDP growth ought to be above  five percent.

“Third, continuous growth in our GDP has not led to significant reductions in our unemployment rate and we i ntend to continue to support efforts that will create jobs for our growing population.

According to information from the IMF, the global economy has been faced with significant headwinds in 2019. As a result of these headwinds, Global GDP growth is expected to fall from 3.6 to 3.0 percent in 2019. This is the lowest rate the global economy has attained since the 2008 – 2009 global financial crisis. It is also the 3rd time growth has been downgraded for 2019 by the IMF. This gives an indication of the outlook countries across the world are faced with. The IMF expects deceleration in growth in close to 90 per cent of the world’s economies. In key markets like China, Germany, USA and India, growth is expected to slowdown in 2019. In China, growth is expected to slowdown from 6.6 percent in 2018 to 6 percent in 2019. In India from 6.8 to 6.1 percent, In the US from2.9 to 2.4 percent, andin Germany from 1.5to 0.5 percent in 2019.

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“Global Growth is expected to recover to 3.4 per cent in 2020, but the prospect remains fragile as advanced economies such as the US, China, and Japan are expected to witness lower growth in 2020. actors responsible for the slowdown in Growth

“A major factor behind the expected slowdown in global growth is the trade war between the US and China.Indeed , the conclusion of global policy analysts is that unless there is a de escalation of the trade tensions between these two largest economies, the global economy would remain very fragile. Together, the US and China represent over 40 per cent percent of global GDP. The rising trade war between both countries, which has resulted in the imposition of high tariffs and the threat of future trade sanctions, are affecting not just these two countries, but other countries that form part of the critical supply chains that shape trade and investment between the two countries. The US has sought to impose tariffs on $400bn worth of goods from China; while China has also sought to impose tariffs on $200bn worth of goods from the US.”

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