" /> Economy searches for growth…as recovery remains fragile | Hallmarknews
Published On: Sun, Sep 10th, 2017

Economy searches for growth…as recovery remains fragile

FELIX OLOYEDE

Edging out of recession in the second quarter of 2017 has left economic analysts deeply divided over the significance of the 0.55 per cent rise in the country’s gross domestic product (GDP), which had remained negative over the previous five straight quarters. The GDP figure flipped up from -0.9 per cent in the first quarter of the year to slightly over half a percentage point as increased output rode on the shoulders of international oil price averaging slightly under $50 per barrel between the months of April and June.

Figures released by the National Bureau of Statistics (NBS) last week saw the country shifting into a higher growth gear as agriculture and industrial sector activities started to pick up marginally.  The agency explained that the economic recovery was underpinned largely by a 1.64 per cent growth in the oil sector, the agricultural sector, which grew 3.01 per cent in Q2 2017 and the electricity and gas and financial services sectors which witnessed a significant 35.5 per cent growth over the period.

Local analysts have noted that the government may need to take more sever action to combat inflation worries as average consumer price index (CPI) remains menacing at a growth rate of 16.05 per cent per annum.

“It is good news that we are out of recession. It shows that confidence is beginning to return to the economy”, says Dr Vincent Nwani, Director, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI) in a telephone conversion in Lagos. “But the country’s economy is still very fragile. There is still divergence between monetary and fiscal policies.”

He explained that the high cost of funds still poses a challenge to economic growth, despite a policy of relatively low interest rates being a critical component of the government’s Economic Recovery and Growth Plan (ERGP), launched earlier in the year by President Mohammedu Buhari.  Nwani noted that the government was even finding it difficult to raise money to implement the economic blueprint, adding that it has been busy borrowing both internationally and domestically, which has made the Debt Management Office (DMO) place a $22 billion borrowing peg on government. Nwani stated that the Buhari-led administration’s penchant for issuing Treasury Bills and Bonds has crowded out the private sector, worsening its chances of raising fresh capital. He maintained the Central Bank of Nigeria’s stance on pursuing tightening monetary policy was stifling the private sector.

“If anything should happen to oil prices or output, Nigeria may slip back into recession,” he cautioned, “The government needs to put in place structures that would make growth sustainable, because it is not organic presently.”

“Although the economy is out of recession, we have not recovered,” Mr Ambrose Oruche, Director, Corporate Affairs, manufacturers Association of Nigeria (MAN), who is an economist, has argued. “The government needs to build on the gains recorded, especially on foreign exchange and implement policies that would reflate the economy. Forex was a major issue that led to recession in the first place.”

He stressed the need for the CBN to put in place more appropriate forex management policies, which would continually make forex available to the industrial sector.

The country suffered acute forex shortage due to the slump in crude oil price, falling as low as $27 per barrel in February 2016. As part of efforts to address this challenge, the apex bank came up with different policies including banning allocating to forex to importers of 41 items, closing of the Retail Dutch Auction System (rDAS) and Wholesale Dutch Auction System (wDAS), stopping of weekly forex allocation to bureau de change operators etc.  During this period, the naira stumbled to N525 to a dollar However, the currency has achieved some stability since the apex bank commenced aggressive intervention in the forex market and introduced the Nigerian Autonomous Foreign Exchange market (NAFEX) also known as the Investors’ and Exporters’ FX Window in April 2017. The CBN has so far injected close to $10 billion into the country’s forex market since the first quarter of 2017.

The naira exchanged $/N365 at the parallel market on Friday, losing 0.10 per cent of its value when compared to $/N358.97 it traded on Thursday.  But dollar was sold for N359.70 and N305.95 on the NAFEX and CBN window respectively.

Meanwhile, the presidency has stated the country’s exit from recession would only be meaningful when it reflects positively in the lives of ordinary Nigerians. “I am looking forward to ensuring that ordinary Nigerians feel the impact.

“Until coming out of recession translates into meaningful improvement in peoples’ lives. Our work cannot be said to be done,” President Buhari stated in a release signed by his Special Assistant on Media and publicity. Garba Shehu.

The International Monetary Fund (IMF) recently noted that Nigeria’s economy was still prone to shocks despite showing signs of recovery. It urged the government to strive for stronger fiscal consolidation through sustainable expansion of the country’s non-oil revenue base. It also challenged the central bank to avoid direct financing of government and maintain a unified and market-based exchange rate.

Crude oil contributes less than 10 per cent to Nigeria’s GDP, but provides over 90 per cent of the country’s foreign exchange earnings, making its economy to suffer severely when oil prices fall in the international market.   Brent Crude was sold for $54.51 per barrel, while Light Crude went for $49.09 on Friday. $42.50 benchmark was used for the 2017 budget.

The Nigerian GDP reports shows that the Q2 2017 growth rate of 0.55 per cent (year-on-year) was 2.04 per cent higher than the rate recorded in the corresponding quarter of 2016 (-1.49%) and higher by 1.46 per cent points from rate recorded in the preceding quarter, which was revised to –0.91% from –0.52% due to revisions to crude output for March 2017.

About 15 economists surveyed by Bloomberg had predicted that the Nigerian economy extended 0.7 per cent in Q2 2017; the IMF projected a 0.8 per cent GDP growth rate for the country at the end of 2017, which would be aided by increase in crude oil price and output.

The preliminary results for the second quarter of the year released by the statistics agency showed the economic recovery was on the back of significant growth recorded in  oil, agriculture, manufacturing and trade activities during the period under review.

The results revealed that Oil GDP recovered significantly from -11.63 per cent in Q2 2016 and -15.40 per cent in Q1 2017 to 1.64 per cent in Q2 2017.

But while Oil GDP expanded considerably in the second quarter of 2017, Non-oil GDP only grew at 0.45 per cent, down from 0.72 per cent in the preceding quarter and -0.38 in the corresponding period in 2016.

It also showed that agriculture continued its strong and positive growth, which it had maintained throughout the recession, growing by 3.01 per cent in Q2 2017, from 3.39 per cent in Q1 2017 and 4.53 per cent in Q2 2016.

Manufacturing retained its positive growth for the second consecutive quarter in Q2 2017, growing at 0.64 per cent compared to 1.36 per cent in Q1 2017 and -3.36 per cent in Q2 2016, while trade which has a dominant share of GDP remained negative at -1.62 per cent, but the contraction in the sector decelerated from the -3.08 per cent recorded in Q1 2017.

Also, electricity and gas and financial institutions sectors also recorded strong growths, with electricity and gas growing by 35.5 per cent, compared to -5.04 per cent in Q1 2017 and -10.46 per cent in Q2 2016 and financial institutions growing by 11.78 per cent in Q2 2017, compared to 0.60 per cent in Q1 2017 and -13.24 per cent in Q2 2016.

The results also showed that the industry sector grew positively by 1.45 per cent in Q2 2017, after nine consecutive quarters of negative growth since Q4 2014.

As a percentage of GDP, services retained the giant share of GDP at 53.73 per cent in Q2 2017, down by 1.94 per cent points (55.67 per cent) from the first quarter of 2017 and 54.80 per cent in Q2 2016; industries accounted for 23.31 per cent of GDP, compared to 22.90 recorded in Q1 2017 and 22.65 per cent in Q1 2016; while agriculture accounted for 22.97 per cent of GDP in the quarter under review, compared to 21.43 per cent in Q1 2017 and 22.55 per cent in Q2 2016.

 

 

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Recent posts

  • Time is ripe for rates cut, says Rewane as inflation slows further in Oct.

    FELIX OLOYEDE This is the appropriate time for the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to cut benchmark monetary rates after inflation rate slows down for the ninth consecutive time in October, said Mr Bismarck Rewane, Managing Director, Financial Derivatives. The National Bureau of Statistics on Tuesday released Consumer Price […]

  • ELAN National Lease Conference Focuses on Revamping Nigerian Economy

    FELIX OLOYEDE In furtherance of its objective of promoting the business of leasing in Nigeria, Equipment Leasing Association of Nigeria (ELAN) has concluded plans to organise the 15th Annual National Lease Conference with focus on revamping the Nigerian economy. The conference which is the biggest gathering of stakeholders in the leasing industry is expected to […]

  • Nigeria-centric restaurant, Labule, opens new outlet in Lagos

    Labule, Nigeria-centric restaurant, operated by an indigenous company, Roots Foods Limited, offering real Nigerian local delicacies in a unique environment that combines the setting of a modern quick service restaurant with that of an African setting of a local ‘buka’, has opened a new outlet on Admiralty Road in Lekki Phase 1, Lagos. The brand […]

  • Nigerian banks shine in Ghana

    By JOHNMARK UKOKO Nigerian banks have been credited with “revolutionizing “the banking sector in Ghana, due to the many innovations they brought to Ghana’s banking sector. The Ghana Deputy Minister of Trade and Investment Hon. Carlos Kingsley Ahenkorah said in Lagos that the innovation and transformation of the Ghana’s banking sector is credited to the […]

  • Ajimobi moves to save Oyo APC from disintegration

    By OLUSESAN LAOYE The seeming crisis in Oyo APC has now forced the Governor of the state, Abiola Ajimobi, to begin consultations with stakeholders to convinced members on why they must come together as a body to face the 2019 general elections, Although the internal crisis is yet to break open as the aggrieved party […]

  • YolaDisCo sale stalled as no potential buyers emerge

    By ADEBAYO OBAJEMU Two years after the core investors of the Yola Electricity Distribution Company, YolaDisCo, declared a force majeure owing to their inability to operate under the reign of terror unleased by Boko Haram, the Federal Government is yet to find any investor interested in operating the utility company, it has been learnt. In […]

  • Company Analysis: Much Ado about Seplat

      By TESLIM SHITA-BEY The oil and gas sector has had a bumpy since the beginning of 2017 with local oil major, Seplat, seeing its financials whipped raw by prior year liabilities despite rising revenues over the nine months (9M). The company in the last two years has moved from being distinctively bad to singularly […]

  • How to start a photography business

    By ZUBAIR DANIE While photography could be accounted for as a full blown course in any offering institution of learning for professionalism, the field equally provides a platform for individuals whose passion it is to project images as a form of livelihood. The socio-cultural aspect of Nigerians that play host of events like: wedding, naming, […]

  • BOFE to celebrate unsung heroes in local communities

    OluwasolaJesuseitan, a brand and advertising expert, is an advocate of sustainable brand communications. He is also the founder, Business Owners Forum Enterprise (BOFE), a non-profit making organization, which seeks to build the capacity of business owners in and around Akute, Ogun State. He tells FELIX OLOYEDE in this interview of his organization is promoting business […]

  • Lager wars: Who wins?

    By JOHNMARK UKOKO Nigeria has many lager beer producing companies, some have been in existence for over 50 years while others are quite new in existence in the country. Some of these companies that have over the years churned out millions, if not billions of bottles of beer to Nigerian drinkers are: Nigeria Breweries Plc, […]

  • Nestle sparkles in Q3 results

    By OKEY ONYENWEAKU As the packaged Consumer goods (PCG) sector struggles to stay ahead of falling consumer demand, companies such as Nestle Nigeria plc are bucking the trend of businesses with shrinking bottom lines. Indeed the multi-product packaged goods producer has seen earnings rise to mind boggling with its pre-tax profit rising by a stunning […]

  • 2018 Budget proposals renew old anxieties

          FELIX OLOYEDE   Mixed reactions trailed the presentation of the 2018 federal government budget by President Muhammadu Buhari to the National Assembly (NASS) last week. Public policy analysts have expressed moods from the congenially positive to the outright incredulous. The staggering N8.6 trillion expenditure plan is one of the most audacious in […]

  • Anambra 2017: Obiano battles for life

    By Obinna Ezugwu The time has finally arrived. On Saturday the people of Anambra State will head to the polls to either renew the mandate of the incumbent state governor, Chief Willie Obiano who is running for a second term in office, or elect fresh hands from among other prominent contenders, including Mr. Oseloka Obaze […]

  • (Editorial) CBN’s BVN distraction and matters arising

    Nigeria’s fiscal and monetary authorities have a frustrating way of responding to the seizure of private assets; they typically gloat with glazed eyes over private citizen’s money ready to pounce on the cash like a pack of hyenas starved witless. The recent order by the Central Bank of Nigeria that customer accounts that are not […]

  • 12 Yoga tips for beginners

    The popularity of yoga has soared in the last decades, and it seems that every other friend and acquaintance of ours is already practicing it. But don’t let it fool you into thinking it is easy: yoga is quite challenging, especially for beginners. The good news is that there are some practical tips to make […]

  • Finally, embattled IGP, Ibrahim Idris, appears before Senate

    The Inspector General of Police, Ibrahim Idris, has arrived before the Senate ad hoc committee set up to investigate the allegations and counter-allegations between him and Senator Isa Misau. The IGP was accompanied by his lawyer, Alex Iziyon (SAN) and Special Assistant to the President on National Assembly Matters (Senate), Senator Ita Enang.   Details […]


Visit us on Google+