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Economy & Politics

All hail ‘Emperor’ Emefiele as inflation rate jumps to highest in 2 years

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The National Bureau of Statistics has reported that inflation rate for the month of May was 9%. This represents a 0.3% rise from April 2014 and the highest month on month percentage change since June/July 2013.

Nigeria’s inflation rate has been rising every month since November 2014 when it was 7.9%. This month’s 9% is incidentally the highest since May 2013 when it hit 9% as well.

According to the National Bureau of Statistics, inflation rose higher due to a higher increase in food prices .

 Food prices edged higher in May as a result of the late onset of rains which have pushed back the harvest season coupled with higher transportation costs due to limited Premium Motor Spirit (PMS) availability. The Food Sub-index rose by 9.8 percent (year-on-year) in May, up by 0.3 percentage points from 9.5 percent in April. All groups which contribute to the Food sub-index increased at a faster pace during the reporting period with the highest year-on-year rises recorded in the Fish, Potatoes, yams and Tubers and Meats groups.

All Items less Farm Produce, which is all other items in the inflation basket except food also recorded its fifth consecutive month of increase.

The pace of advances recorded by the “All Items less Farm Produce” or Core sub-index increased for the Fifth consecutive month in May. The Core Sub-index increased by 8.3 percent (year-on-year), 0.6 percentage points from 7.7 percent recorded in April, with the highest pressures observed in the Housing Water, Electricity, Gas and Other Fuels; Alcoholic Beverage, Tobacco and Kola; and Transportation divisions. The pace of increases continued to slow in the Communications division however.

The Central Bank Governor, Godwin Emefiele has dished out several monetary policy circulars in the past 6 months in response to dwindling oil prices, depreciation of the naira and the national elections. Unfortunately, one of his many policies was the depreciation of the naira which is perhaps the biggest driver of the inflation in the country.

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With the naira depreciated, cost of goods are expected to sky rocket as importers adjust their input cost. The exchange rate was also a crucial factor in the subsidy payment debacle between the immediate past government and the oil marketers as they disagreed on what exchange rate subsidy payments will be based on.

The CBN Governor must be feeling the heat as an increase in inflation basically thumps its monetary policy actions. Prices of goods and services are only going to get more expensive. Banks will also respond in kind by jacking up interest rates to match the new reality.

The current government is still yet to make any major pronouncement on the economy and one should believe that they nevertheless watching events closely.

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Economy & Politics

Recession: Economy should be redirected from wasteful consumption to productivity – Peter Obi

Peter Obi has warned that that the current recession could be worse than that of 2016, because debt raised by the administration was not properly invested.

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Recession: Economy should be redirected from wasteful-consumption to productivity — Peter Obi

Former Governor of Anambra State, Peter Obi, has said that Nigeria needs to trim the unnecessary expenditure on its budget and redirect the economy towards a production-based one. He also warned that that the current recession would be worse than that of 2016, because debt raised by the administration was not properly invested.

Peter Obi disclosed this in a social media statement on Sunday and in an interview with Channels TV.

READ: Afrinvest cautions FG on World Bank’s EoDB ranking

(READ MORE: Nigeria is in a weak financial position to absorb recession shocks —Bismark Rewane)

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“For Nigeria to pull itself out of this economic recession, the 2nd in the last 5 years, there’s a compelling need to cut the pork out of the budget and expenditure at all levels of government and redirect the economy from a wasteful consumption-based one to a productive economy,” he said.

He mentioned in his TV interview that Nigeria should emulate other countries trying to pull out of the economic mess by concentrating on improving monetary and fiscal policies.

READ: NBS hits back at Prof Hanke, says Nigeria’s inflation is not 33%

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READ: Surviving the looming recession in the Nigerian tech space

He said that the October protests were signs that politicians needed to sit up in order to arrest the situation before it gets worse.

“Every other country is discussing the recession and how to pull their people out of poverty. So, what we should do now is concentrate on the monetary and fiscal policies to start pulling people out of poverty.

“If you see what happened with the recent protests, you could see that we are heading into a problem. And I want our energy to be concentrated on that problem. The politicians, the class where I belong, should do more seriously, across party lines, to be able to arrest the situation before it gets out of hand,” he said

(READ MORE: Nigerians pay heavy price as laptop scarcity bites harder)

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He also stated that priority should be on putting food on the table now instead of discussing the 2023 elections.

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“For me, it is in discussing how do we put food on people’s table. Elections will come and we can see how to select the best. But let’s deal with the recession we have just entered before 2023.

“This recession is going to be worst than in 2016 because the monies we borrowed then were not properly invested.

READ: NNPC, only Nigerian company to cut losses by N800 billion in one financial year – GMD

“What we need now is to go into a vigorous regime of formulating implementable and measurable monetary and fiscal policies to drive ourselves out of the present situation,” he said.

What you should know 

Nairametrics reported that Nigeria’s Gross Domestic Product (GDP) in real terms declined by -3.62% (year-on-year) in Q3 2020, thereby marking a full-blown recession and second consecutive contraction from -6.10% recorded in the previous quarter (Q2 2020).

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Former Vice President of Nigeria, Atiku Abubakar, had warned that Nigeria must stop borrowing for anything other than essential needs. He added that very non-essential line items in the proposed 2021 budget must be expunged in a bid to kick-start the economy from a recession.

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Economy & Politics

Recession: Nigeria must stop borrowing for anything other than essential needs – Atiku

Atiku Abubakar has advised the Federal Government to expunge non-essential line items from the proposed 2021 budget.

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Biden should widen the AGOA for integration with the AfCFTA - Atiku, Intels denies NPA statement, Nigerian Ports Authority and Intels, Atiku Abubakar, Atiku claims he has big plans for private sector investment in infrastructure, Coronavirus: Atiku calls for petrol pump price reduction, stamp duty suspension

Former Vice President of Nigeria, Atiku Abubakar has warned that Nigeria Nigeria must stop borrowing for anything other than essential needs, he also added that very non-essential line items in the proposed 2021 budget must be expunged and others in a bid to kick start the economy from a recession.

Atiku disclosed this in a social media statement on Sunday, titled: “We Must Exit This Recession With Precision”.

Atiku said he received confirmation of Nigeria’s slide into recession for the second time in five years with a heavy heart. He urged that the poor economic environment could have been avoided if his ideas of cutting costs of governance were incorporated.

“This could have been avoided had this administration taken heed to patriotic counsel given by myself and other well-meaning Nigerians on cutting the cost of governance, saving for a rainy day, and avoiding profligate borrowing.

“Yes, the COVID-19 pandemic has exacerbated an already bad situation, however, we could have avoided this fate by a disciplined and prudent management of our economy.

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” It serves no one’s purposes to quarrel after the fact. We must focus on solutions. Nigeria needs critical leadership to guide her back to the path of economic sustainability,” he said.

Atiku warned that Nigeria’s proposed 2021 budget is no longer feasible as the Federal Government does not have the budget to afford heavy luxuries. He, therefore, urged the government to expunge every non-essential line items from the budget.

“We must act now, by taking necessary, and perhaps painful actions. For a start, the proposed 2021 budget presented to the National Assembly on Tuesday, October 8, 2020, is no longer tenable.

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“Nigeria neither has the resources, or the need to implement such a luxury heavy budget. The nation is broke, but not broken. However, if we continue to spend lavishly, even when we do not earn commensurately, we would go from being a broke nation, to being a broken nation.

“As a matter of importance and urgency, every non-essential line item in the proposed 2021 budget must be expunged.

“For the avoidance of doubt, this ought to include estacodes, non-emergency travel, feeding, welfare packages, overseas training, new vehicle purchases, office upgrades, non-salary allowances, etc,” Atiku said.

The former Peoples Democratic Party presidential candidate added that the budget must focus on essential items including human development investments and policies that increase the purchasing power of Nigerians.

” Nigeria ought to exclusively focus on making budgetary proposals for essential items, which include reasonable wages and salaries, infrastructural projects, and social services (citizenry’s health, and other human development investments)”

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” Additionally, we have to stimulate the economy, by investing in human development, and increasing the purchasing power of the most vulnerable of our population. Only a well-developed populace can generate enough economic activity for the nation to exit this recession.”

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Atiku called on a monthly stimulus package to poor Nigerians which he adds should be funded not by debt but by adding a 15% tax to luxury purchases.

He said, ” For example, a stimulus package, in the form of monthly cash transfers of ₦5000 to be made to every bank account holder, verified by a Bank Verification Number, whose combined total deposit in the year 2019 was lower than the annual minimum wage.

” How will this be funded? By more profligate borrowing? No. I propose a luxury tax on goods and services that are exclusively accessible only to the super-wealthy. A tax on the ultra wealthy to protect the extremely poor.

“A practical approach to this is to place a 15% tax on all Business and First Class tickets sold to and from Nigeria, on all luxury car imports and sales, on all private jets imports and service charges, on all jewellery imports and sales.”

“And above all, Nigeria must stop borrowing for anything other than essential needs. Again, for the avoidance of doubt, borrowing to pay salaries, or to engage in White Elephant projects, is not an essential need.

“If we keep borrowing, we stand the risk of defaulting, and that will make recession a child’s play because we will lose some of our sovereignty.

What you should know 

Nairametrics reported that Nigeria’s Gross Domestic Product (GDP) in real terms declined by -3.62% (year-on-year) in Q3 2020, thereby marking a full-blown recession and second consecutive contraction from -6.10% recorded in the previous quarter (Q2 2020).

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Economy & Politics

Nigeria’s economy dips into second recession in 5 years 

NBS data for Q3 2020 shows a dip of 3.62% in real GDP, confirming the Nigerian economy has officially fallen into a second recession in 5 years.

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Nigerian economy and its many problems

The data released by the National Bureau of Statistics (NBS) for Q3 2020 shows a dip of 3.62% in real GDP for Nigeria, which strongly confirms that the Nigerian economy has officially fallen into a second recession in 5 (five) years, since 2016, when the economy contracted by 1.62%. 

READ: Boosting IGR; A necessity for states to avoid total dependence on FAAC allocations

The decline in the GDP for Q3 2020 is not unconnected with low activities both at the domestic and international levels which hugely affected the economic growth during the quarter as a result of several lockdown measures to contain the COVID-19 pandemic all over the world. 

READ: Honeywell reports N300 million pre-tax profits in Q2 2020

The non-oil sector contributed a huge chunk of the real GDP in Q3 2020 with 91.27%, higher than its share of 90.23% in Q3 2019 and 91.07% in Q2 2020, while the oil sector contributed 8.73%, though a decrease in its contribution of 9.97% in Q3 2019 and 8.93% in Q2 2020. 

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READ: NBS hits back at Prof Hanke, says Nigeria’s inflation is not 33%

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READ: Citibank: Bitcoin could skyrocket by $300,000 in 2021

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