Economy
Nigerian Economy Exits Recession: Implications and Policy Options
After five consecutive quarters of contraction in the Real Gross Domestic Product (GDP), the Nigerian economy exited the first recession in over two decades. The Q2, 2017 figures that the National Bureau of Statistics (NBS) released on Tuesday, September 05, 2017 shows that the GDP recorded a growth rate of 0.55%. The growth in the GDP was mainly due to the growth recorded in Agriculture, Financial and Insurance, Electricity, Gas, Steam and Air Conditioning Supply, and Mining and Quarrying sectors of the Nigerian economy.
The Oil sector, which grew by 1.64% in Q2, 2017, recorded the first growth since Q4, 2015. The growth in the Non-Oil sector at 0.45% in Q2 2017 decelerated from a growth rate of 0.72% recorded in Q1, 2017.
The Nigerian economy entered into a recession in Q2 2016 following two consecutive quarters of GDP contraction. The recovery in crude oil production and price and the introduction of the Investors’ and Exporters’ foreign exchange window, which increased the supply of foreign exchange to end users, helped to pull the economy out of recession.
We highlight policy options to sustain the growth and to ensure that the growth translates to development.
An analysis of the GDP by sectoral size shows that Agriculture, Trade, and Information and Communication are the three largest sectors of the economy and they contributed 22.97%, 17.1% and 12.39% respectively in Q2, 2017. Trade and Information and Communication contracted by 1.62% and 1.15% respectively. Although Agriculture grew by 3.01% in Q2, 2017, it recorded the lowest growth rate since Q1, 2015. The weak purchasing power in the country occasioned by high unemployment and inflation rates was the main driver of the contraction in the Trade sector.
The performance of the Information and Communication sector was due to the high cost of running communication equipment and services occasioned by the devaluation of the Naira in the face of a fixed tariff regime.
Meanwhile, the series of attacks in the crop producing regions in the country particularly in the Middle-Belt and the North, and the poor infrastructure in transportation and storage facilities led to the deceleration in the growth rate of the Agriculture sector.
The Real Estate sector, which contributed 7.22% to the GDP, also contracted by 3.53% in Q2, 2017 albeit at a much lower rate when compared with the contraction of 5.27% recorded in Q2, 2016.
The Manufacturing sector, which contributed 9.38% to the GDP, recorded a weak growth of 0.64% from a growth of 1.36% recorded in Q1, 2017. This was however a recovery compared with the contraction of 3.36% recorded in Q2, 2016.
There is the need for the Federal Government of Nigeria (FGN) to find a lasting solution to the attacks on farm lands in Nigeria in order to increase production. There should also be incentives in the form of tax reliefs and favourable land acquisition laws for the agro-allied industry in order to boost agriculture.
Additionally, there should be more focus on agricultural training and research institutes in the country to increase farm yields.
Concrete steps should be taken to involve the private sector in the provision of transport and storage facilities to reduce waste and give farm produce easy access to markets.
Government may also consider tax holidays and reduction to companies that make use of local agricultural raw materials in their production process. This will increase both human and material employment of local resources in Nigeria.
It is also important to allow for an adjustment in the communication tariff to boost investments and improve facility maintenance. In order to support the growth of real estate, government at all levels should partner with real estate developers, both local and foreign, to support the development of mass housing projects for low and middle income earners.
These housing units should be made available through long-term financing structures, which should be guaranteed by the government. This would provide both direct and indirect employment opportunities to Nigerians in real estate, construction and manufacturing sectors. In addition, it will help to protect the revenue of the government against the volatility in the oil industry and ultimately guarantee sustainable economic growth and development.
By Adedapo Adesanya
Five securities pulled down the NASD Over-the-Counter (OTC) Securities Exchange by 1.72 per cent on Friday, August 14, cutting the market capitalisation by N47.04 billion to N2.689 trillion from N2.727 trillion, and slicing the NASD Security Index (NSI) by 78.37 points to 4,465.83 from 4,532.03 points.
11 Plc led the price decliners yesterday after its price went down by N15.03 to N230.00 per share from N245.03 per share. MRS Oil Plc weakened by N13.20 to N118.80 per unit from N132.00 per unit, Central Securities Clearing System (CSCS) Plc slid by N10.30 to N99.46 per share from N109.76 per share, Okitipupa Plc fell by N6.99 to N270.01 per unit from N277.00 per unit, and Afriland Properties Plc dipped by N2.00 to N20.00 per share from N22.00 per share.
Business Post reports that the OTC securities exchange recorded four gainers during the session, led by FrieslandCampina Wamco Nigeria Plc, which appreciated by N9.85 to N169.85 per unit from N160.00 per unit. IPWA Plc gained 70 Kobo to close at N10.41 per share versus N9.71 per share, Industrial and General Insurance (IGI) Plc rose by 4 Kobo to 54 Kobo per unit from 50 Kobo per unit, and Geo-Fluids Plc improved by 1 Kobo to N2.06 per share from N2.05 per share.
The volume of trades soared by 64.8 per cent to 3.2 million units from the previous session’s 1.9 million units, the value of transactions jumped by 78.2 per cent to N375.7 million from N210.8 million, and the number of deals surged by 35.3 per cent to 46 deals from 34 deals.
Great Nigeria Insurance (GNI) Plc was the most traded stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 79.0 million units exchanged for N5.7 billion.
GNI Plc also closed the day as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units traded for N415.7 million.
By Dipo Olowookere
The dominance of the bears on the Nigerian Exchange (NGX) Limited was consolidated on Friday, after further inflicting an 0.12 per cent loss at the close of trading activity.
All the key sectors of the local stock market turned red yesterday as a result of sustained profit-taking, though the industrial goods space was flat.
The insurance counter lost 1.49 per cent, the energy index shed 0.63 per cent, the consumer goods segment declined by 0.46 per cent, and the banking sector tumbled by 0.23 per cent.
Consequently, the All-Share Index (ASI) retreated by 398.18 points to 242,619.20 points from 243,017.38 points, and the market capitalisation receded by N257 billion to N156.624 trillion from N156.881 trillion.
Fortis Global Insurance lost 9.31 per cent to trade at N2.63, Omatek depreciated by 9.04 per cent to N1.51, John Holt slipped by 9.00 per cent to N9.10, RT Briscoe slumped by 7.94 per cent to N11.60, and Dangote Sugar went down by 7.79 per cent to N64.55.
But International Energy Insurance gained 9.92 per cent to sell for N5.32, Trans-Nationwide Express appreciated by 9.65 per cent to N2.84, Guinea Insurance improved by 6.67 per cent to 80 Kobo, Regency Alliance grew by 6.25 per cent to 85 Kobo, and Japaul jumped by 5.36 per cent to N2.95.
The market breadth index remained negative, with 30 price losers and 21 price gainers, indicating weak investor sentiment.
The level of activity contracted yesterday, with the trading volume, value, and number of deals down by 66.67 per cent, 10.65 per cent, and 5.60 per cent, respectively.
This was because market participants transacted 1.4 billion shares worth N45.3 billion in 39,134 deals during the session compared with the 4.2 billion shares valued at n50.7 billion traded in 41,454 deals on Thursday.
Fortis Global Insurance was the most active equity for the day, with a turnover of 874.1 million units valued at N2.4 billion, Cornerstone Insurance sold 100.3 million units worth N506.5 million, Universal Insurance traded 56.7 million units for N44.5 million, Sterling Holdings exchanged 53.3 million units worth N402.9 million, and MTN Nigeria transacted 44.6 million units valued at N31.4 billion.
By Adedapo Adesanya
The Naira maintained stability against the United States Dollar in the different segments of the foreign exchange (FX) market on Friday, August 14, according to data obtained by Business Post.
At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the local currency remained unchanged at N1,357.65/$1, but lost N6.05 against the Pound Sterling to trade at N1,840.10 versus the previous session’s N1,834.05/£1, and depreciated against the Euro by N4.70 to sell for N1,571.70/€1 compared with the preceding day’s N1,567.00/€1.
At the black market, the Nigerian currency traded flat against the Dollar at N1,395/$1, but gained N3 at the GTBank forex desk to quote at N1,364/$1 versus Thursday’s exchange rate of N1,367/$1.
Data from the Central Bank of Nigeria (CBN) showed that interbank FX transactions surged by 51.2 per cent to $119.594 million from $79.097 million. These transactions were executed in 137 deals, higher than the 98 deals recorded a day earlier.
FX inflows from exporters, remittances and other sources, alongside demand from importers and individuals requiring Dollars, continue to shape market conditions.
Meanwhile, the cryptocurrency market recovered yesterday after experiencing a downturn in the previous sessions following reports that index provider MSCI has proposed new “non-operating company” screens for its Global Investable Market Indexes. Although the framework does not explicitly target cryptocurrency, it evaluates whether a company’s core operating assets constitute more than 50 per cent of its total holdings.
Heavy digital asset treasury adopters, including Strategy and Metaplanet, fail the proposed criteria and face potential removal during upcoming index rebalancings. While inclusion in major equity benchmarks previously allowed passive index funds and ETFs to automatically acquire these stocks, their removal could trigger forced institutional selling.
Dogecoin (DOGE) grew by 0.7 per cent to $0.07, Binance Coin (BNB) expanded by 0.6 per cent to $611.34, Ethereum (ETH) added 0.4 per cent to trade at $1,879.65, and Bitcoin (BTC) increased by 0.2 per cent to $63,045.87, with Ripple (XRP), the US Dollar Tether (USDT), and the US Dollar Coin (USDC) flat at $1.00, respectively.
But Cardano (ADA) lost 1.2 per cent to trade at $0.1795, TRON (TRX) shed 0.4 per cent to finish at $0.3323, and Solana (SOL) declined by 0.2 per cent to $75.60.
