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The Challenges Facing Nigeria’s Economy

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Nigeria Economy challenges

The Challenges Facing Nigeria’s Economy

The ongoing COVID-19 crisis is threatening to push Nigeria’s economy backwards, just a few years after the country successfully emerged from a damaging recession. The warning signs are flashing again as increased borrowing, a weakening currency and rising unemployment loom ominously.

As government and financial institutions struggle to remedy the situation, there is a growing demand for foreign exchange, forcing banks to ration outflow, while the hoped-for rally in oil prices has not materialised. Over-dependence on oil, policy inconsistency, insecurity and a persistent level of corruption have all had a dampening effect on the nation’s finances.

But Nigeria remains a nation with tremendous resources and potential, and there are reasons to be optimistic about the future, with a number of avenues to explore that could offer increasing prosperity and a way to guide the country to a firmer financial footing.

Promise of Agriculture

Agriculture remains a strength for Nigeria and it has the potential to help revive the economy. There are a number of plans in place, such as the Kano Agro Pastoral Project, that can help to galvanise this important part of the Nigerian economy. Nigeria is blessed with huge reserves of arable land and a significant farming population, offering a potential solution not just to economic downturn but also to the equally important issues of food poverty and food security.

There are promising signs that cooperation between agricultural specialists, state and national governments is starting to take effect, and by focusing on developing targeted crop value chains while improving the rural infrastructure, Nigeria’s farmers can be empowered to boost the economy.

Importance of Diversification

Nigeria has enormous human potential and economic ingenuity. The inventiveness of the Nigerian entrepreneur is on display across many sectors.

Take the thriving and growing mobile technology sector. Evidence suggests that mobile penetration increased from 36% to 50% between 2014 and 2017. That trend has continued with one estimate by Business Monitor International putting the likely number of mobile subscribers at 182 million by 2021, up from 153 million in 2017. Demand for mobile services has been driven both by technological advances and the dynamic marketing practices of Nigerian mobile companies.

This proliferation of mobile usage is also helping to drive the success of some of the top online casinos in Nigeria. The online casino sector, boosted by the ever-widening availability of mobile technology, is expanding rapidly, particularly among the increasingly affluent young Nigerian middle class.

Innovative local gaming companies are striking deals with major online casino content providers, as well as with international payment providers and digital support companies, enabling them to offer an ever more cutting-edge casino gaming experience.

The rise of the online casino and mobile sectors demonstrates Nigeria’s entrepreneurial potential. But fully unleashing that potential may first require tackling the country’s over-reliance on oil revenue. This has become a problem, but Nigeria has the opportunity to lead the way in designing the new green economy of the 2020s.

The government has already launched Africa’s first sovereign green bonds and has taken steps to extricate the country from oil dependency, starting with a cut in oil subsidies.

Money diverted from the oil industry can be directed into the renewables sector, while the Nigerian Ecological Fund has the potential to tackle some of the serious ecological problems facing the nation – a clean-up that can also boost the economy. The Ministry of Works, in conjunction with the wider government, can help to lead the way by bringing about green reforms in the Nigerian construction industry, while tackling the serious housing shortage in the country.

Rise of technology

Technology is another way in which Nigeria can help to steer its economic ship to safer waters. Although it can be difficult to focus on the future in times of economic difficulty, there is enormous untapped potential in Nigeria when it comes to technological change, not least among the country’s business sector. A strong push to adopt new methods, such as remote work, e-commerce and artificial intelligence, much of which has been given a boost by the pandemic, could reap dividends.

There is a huge potential demand for improved IT infrastructure, from collaboration tools that enable workers to operate effectively as a team while working at home, to teaching solutions that can enable teachers to deliver lessons remotely. And beyond that, the promises of cloud computing and smart homes offer Nigeria the opportunity to be bold and take the lead in African technology.

Retooled finance

Technology can also have a role to play in helping the Nigerian finance sector to contribute to the national economy. The pandemic has shown that more can be done in terms of automation and technical solutions to financing problems, while at the same time, the sector can do more to reach out to all sectors of society. The Nigerian finance industry is full of talent and the desire for innovation, and if unleashed, can play a major role in the nation’s recovery.

Like many other nations around the world, Nigeria has taken a hit due to COVID-19 and there are specific long-term problems that the country still needs to face. But the nation remains one of the most significant countries in the world and a powerhouse in Africa, and with sufficient guidance and investment, the potential of Nigerian farmers, business people, administrators, bankers and scientists can be harnessed to help build a more prosperous future.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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Economy

Sell-Offs in Dangote Cement, Others Plunge NGX Further by 1.47%

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Dangote cement unclaimed dividends

By Dipo Olowookere

Sustained profit-taking in high-cap stock like Dangote Cement deepened the woes of the Nigerian Exchange (NGX) Limited on Wednesday.

The domestic equity market lost 1.47 per cent at midweek as the National Bureau of Statistics (NBS) revealed that inflation in Nigeria was further elevated in December 2024 by 34.80 per cent, prompting investors to maintain their selling pressure stance.

Data showed that the industrial goods index depreciated by 4.70 per cent at the close of business as the insurance sector slumped by 3.47 per cent.

However, the consumer goods space improved by 0.99 per cent, the energy counter appreciated by 0.15 per cent, and the banking industry gained 0.02 per cent.

When the closing gong was struck by 2:30 pm to signal the close of trading activities yesterday, the All-Share Index (ASI) was down by 1,529.59 points to 102,095.95 points from 103,625.54 points and the market capitalisation went down by N933 billion to N62.257 trillion from N63.190 trillion.

Like the preceding trading day, investor sentiment was weak at midweek after Customs Street ended with 28 price gainers and 39 price losers, implying a negative market breadth index.

Universal Insurance and Dangote Cement were the biggest price losers as they shed 10.00 per cent each to close at 63 Kobo, and N387.90, respectively, as John Holt declined by 9.99 per cent to N8.47, Transcorp Power lost 9.97 per cent to close at N324.00, and Omatek tumbled by 9.89 per cent to 82 Kobo.

Conversely, Dangote Sugar, NASCON, and Sunu Assurances chalked up 10.00 per cent each to sell for N36.85, N38.50, and N6.71, respectively, as SAHCO rose by 9.95 per cent to N33.15, and Austin Laz grew by 9.94 per cent to N1.99.

Business Post reports that investors bought and sold 435.5 million equities valued at N9.4 billion in 12,098 deals during the session versus the 503.3 million equities worth N12.6 billion traded in 12,900 deals on Tuesday, indicating a decline in the trading volume, value, and number of deals by 13.47 per cent, 25.40 per cent and 6.22 per cent apiece.

Universal Insurance topped the activity log with the sale of 70.3 million shares for N46.4 million, AIICO Insurance traded 39.7 million equities valued at N67.5 million, Access Holdings exchanged 16.8 million stocks worth N414.0 million, Livestock Feeds transacted 16.8 million shares valued at N106.8 million, and Nigerian Breweries traded 16.2 million equities worth N518.2 million.

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Bitcoin Trading Surges Ahead of Inauguration as Open Interest Hits $237m

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Bitcoin news

By Aduragbemi Omiyale

As the world, particularly the United States prepare for the second coming of Mr Donald Trump to the White House next Monday, there have been significant interest in the cryptocurrency market.

Mr Trump, who was the President of the US from 2017 to 2021, won the 2024 presidential election by defeating the current Vice President, Ms Kamala Harris, who was the candidate of the Democratic Party, and will be sworn-in on Monday, January 20, 2025, for a second term in office.

The Head of Research at Derive.xyz, Mr Sean Dawson, while commenting on the renewed interest in Bitcoin ((BTC) and other digital coins in the market, said, “In the last 24 hours, BTC trading activity has surged, with open interest hitting an impressive $237 million.

“With 38 per cent of BTC contracts being calls bought and 37.3 per cent puts bought, it’s clear that traders are positioning for increased volatility, particularly with the inauguration just days away.

“This appetite for market swings likely reflects growing uncertainty in U.S. markets as expectations for a near-term rate cut diminish.”

“Additionally, bearish sentiment appears to be gaining traction, with BTC puts now making up 40 per cent of all open interest, a sharp increase from 20 per cent just last week. This shift suggests traders are hedging against potential downside risks as we approach the inauguration.

“Implied volatility (IV) trends further highlight this heightened uncertainty. BTC’s 7-day ATM IV has risen by 3 per cent to 56.5 per cent, while the 30-day IV is up 1.5 per cent, now at 57.5%. This steady climb points to a more volatile market sentiment leading up to the event,” he further said.

”ETH, on the other hand, has seen an even more pronounced spike in IV. Over the past 24 hours, ETH’s 7-day IV has surged by 6 per cent to 74 per cent, nearly double the rise seen in BTC.

“Meanwhile, its 30-day IV has climbed 2.5 per cent to 69.5 per cent. This disparity suggests ETH traders are anticipating greater immediate volatility, possibly due to its higher sensitivity to macroeconomic shifts and speculation surrounding post-inauguration policies.

“As the inauguration draws near, these trends underline a pivotal moment for traders, with both BTC and ETH markets reflecting a mix of caution and readiness for potential sharp moves,” Mr Dawson stated.

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Economy

Nigeria’s Inflation Jumps to 34.80% in December 2024

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inflation in Nigeria

By Adedapo Adesanya

Nigeria’s inflation hit 34.80 per cent in December 2024 from 34.60 per cent in November 2024, spurred by festive activities.

This was disclosed by the National Bureau of Statistics (NBS) in its first published data after almost a month of blackout on its website following a purported hack.

The December 2024 headline inflation rate showed a marginal increase of 0.20 per cent compared to the November 2024 headline inflation rate.

This was due to December festive period increases in demand for goods and services.

On a year-on-year basis, the headline inflation rate was 5.87 per cent higher than the rate recorded in December 2023 (28.92 per cent). This shows that the headline inflation rate (year-on-year basis) increased in December 2024 compared to the same month in the preceding year (i.e., December 2023).

On the contrary, the month-on-month basis, the headline inflation rate in December 2024 was 2.44 per cent, which was 0.20 per cent lower than the rate recorded in November 2024 at 2.64 per cent.

This means that in December 2024, the rate of increase in the average price level is slightly lower than the rate of increase in the average price level in November 2024.

Meanwhile, the food inflation rate in the festive month was 39.84 per cent on a year-on-year basis, 5.91 per cent points higher compared to the rate recorded in December 2023 at 33.93 per cent.

The rise in food inflation on a year-on-year basis was caused by increases in prices of the following items; yam, water yam, sweet potatoes, etc (potatoes, yam & other tubers class), beer, pinto (tobacco class), guinea corn, maize grains, rice, etc (bread and cereals class), and dried fish-sadine, catfish dried, etc (fish class).

On a month-on-month basis, the Food inflation rate in December 2024 was 2.66 per cent which shows a 0.32 per cent decrease compared to the rate recorded in November 2024 at 2.98 per cent.

The decline can be attributed to the rate of decrease in the average prices of local beer (burukutu), pinto (tobacco Class), fruit juice in tin, malt drinks, etc (soft drinks class), rice, millet, maize flour, etc (bread and cereals class) and water yam, irish potatoes, coco yam, etc (potatoes, yam & other tubers class).

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