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Nigeria’s GDP records slow growth of 2.01% in Q1, as Oil contracts

Nigeria’s Gross Domestic Product (GDP) recorded slow growth of 2.01 percent in real terms, in the first quarter of in the first quarter (Q1) 2019, compared to 2.38 percent in Q4 2018. This is revealed in the latest GDP data released by @nigerianstat. Meanwhile, the oil sector contracted for the fourth consecutive quarter.

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Nigeria's GDP

Nigeria’s Gross Domestic Product (GDP) grew by 2.01 percent in real terms, in the first quarter (Q1) of 2019, compared to 2.38 percent in Q4 2018. This is revealed in the latest GDP data released by the National Bureau of Statistics (NBS).

According to the NBS report, year on year, Nigeria’s GDP grew by 2.01 percent, compared to the corresponding growth of 1.89 percent in Q1 2018. Analysis of the GDP data also shows that although Nigeria’s service and industrial sectors grew in the previous quarter (Q4 2018), both contracted in the quarter under review.

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Also, aggregate GDP stood at N31.7 million in nominal terms, higher than in the first quarter of 2018 which recorded N28.4 million; representing a year on year nominal growth rate of 11.80%. Basically, the nominal GDP growth rate in Q1 2019 was higher than the rate recorded in Q1 2018 by 2.54% points.

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Growth by Sectors: Nigeria’s GDP by sector shows that the services and industrial sectors contracted in the quarter when compared to the previous quarter of 2018. The agricultural sector, however, peaked. Specifically, the industrial sector grew at an abysmally low growth of 0.04 percent for the quarter, showing that there was a lackluster performance of Nigeria’s industrial sector. Contractions in growth may partly be traceable to the general elections, as noted by the Bureau.

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Similarly, the services sector also contracted in the quarter from 2.90 percent in Q4 2018, to 2.41 percent in Q1 2019. However, the agricultural sector continued its growth prospect as it recorded a 3.17 percent growth in the quarter, up from 2.46% recorded in the last quarter of 2018. This suggests that Nigeria’s agricultural sector is on the growth path despite challenges witnessed due to dependence on Oil.

Sectors’ contributions to GDP: Analysis of the data shows that the services sector maintains its bullish path, as it marshaled the percentage of sectors contributions to GDP. In Q1 2019, the contribution of Nigeria’s services sector to the GDP was estimated at 54.60 percent, up from 52.63 percent and higher than 2018 full year contribution of 52.63 percent.

The industry sector also improved in terms of contribution to total GDP. It recorded 23.49 percent of total GDP when compared to 2.24 percent in the last quarter of 2018. It is also higher than the full year 2018 of 22.24 percent.

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Get the latest insights on Nigeria’s GDP

However, the contribution of the agricultural sector contracted to 21.91 percent, lower than its contribution in the last quarter. Meanwhile, the agricultural sector’s contribution was higher than the corresponding quarter of 2018 with 21.66 percent.

Oil and Non-oil sectors: The Nigerian economy can be classified broadly into the oil and non-oil sectors. Growth in Nigeria’s oil sector contracted and worsened as it recorded negative growth of -2.40 percent in Q1 2019, down from -1.62 percent earlier recorded. Note that Nigeria’s oil sector has been contracting since the second quarter (Q2) of 2018.

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According to the NBS’s data, Oil entered the negative region and contracted in Q2 2018 to -3.95 percent from 14.02 percent in Q1, and later to -1.62 percent in Q4 2018. However, despite recording three months consecutive decline, the oil sector recorded a positive growth of 0.97 percent in the full year 2018.

On the other hand, the Non-oil sector has gained over the oil sector since the Q2 of 2018. Data shows that the oil sector grew by 2.47 percent in Q1 2019. Although, this shows a drop when compared to 2.70 percent recorded in Q4 2018. Comparing the oil and non-oil GDP, in the full year 2018, Non-oil sector grew by 2.00 percent, while the oil sector grew by 0.97 percent.

Similarly, in terms of contribution to the GDP, the non-oil sector also improved, recording 9.14 percent up from 7.06 percent in Q4 2018. Oil contracted in its contribution but still maintained the biggest contribution to GDP of 90.86 percent.

Optics: Nigeria’s GDP contracted in the latest data released by the Bureau. However, the Bureau noted that the contraction is most likely due to the general elections. The Bureau also stated that the 2.01 percent growth may have reflected in the strongest first quarter performance observed since 2015.

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2015 and 2019 Post elections Nigeria's GDP

2015 and 2019 Post elections Nigeria’s GDP

This implies that Nigeria’s economy is on a sustainable growth path as it withstood the shock of the general elections in 2019, better than it did in 2015. On the other hand, the growth recorded in the non-oil sector shows that government policies in diversifying the economy may already be showing signs of progress.

Upshots: Nairametrics had earlier reported about analysts’ prediction that the economy will grow by 2.25 percent in 2019, with agriculture expected to post a very gradual recovery to its trend growth rate of 3 percent. Also, the 2.01 percent growth further corroborates the decline in inflation for three consecutive months in the first quarter, with surging oil prices making it possible for the CBN to use reserves buffer to stabilize naira. Nairametrics expects Nigeria’s trade to also improve in the quarter.

Although, the growth recorded is slower than what was recorded in the previous quarter, there are signs of sustainable growth in the economy. However, the decline in the industrial sector may be a source of concern in the next quarter.

Patricia

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Tech News

3 startups to get N3 million grant each in the COVID-19 virtual hackathon 

The hackathon hopes to identify accessible and cost-effective E-Learning solutions for public schools.

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The Nigerian Communications Commission has announced that 3 finalist startups will get a grant of N3 million each at the end of the COVID-19 virtual hackathon 

These three startups will be selected from submitted entries that meet all the criteria and provide adaptable digital solutions for addressing the present and future impacts of pandemic and epidemic diseases 

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The solutions must be novel, clearly explained, with proof of concept  

NCC announced this through a statement published on its Twitter handle.  

The grant, it said, will enable the three startups with the most promising digital solutions to produce a prototype within 2 months of receipt.  

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According to the statement, submitted entries are expected to provide solutions in sectors such as health, digital communications, education, transportation.  

For those in health, the solutions should find a way to empower frontline healthcare workers or prevent, trace, and contain the spread in Nigeria.  

Solutions in digital communications are expected to aid the sustenance of economic activities and people-to-people communication while encouraging social distancing without compromising productivity. 

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The hackathon also hopes to identify accessible and cost-effective E-Learning solutions for public schools, as well as improved safety measures in public transportation in Nigeria.  

Interested tech hubs, startups and innovative digital SMEs can still submit entries on or before July 17, 2020.  

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Financial Services

CBN expands scope of regional banks in Nigeria, gives compliance timeframe

The aim of this directive is to expand the reach of the regional banks across the country, the CBN said.

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Regional Banks

The Central Bank of Nigeria (CBN) has expanded the scope of regional banks in the country, by requiring them to open branches in at least one additional geopolitical zone outside of the existing geopolitical zones where their operating licenses cover.

A circular that was issued earlier this week by the apex bank said this new directive is in accordance with “section 8 (g) of the CBN Scope, Conditions & Minimum Standards for Commercial Banks Regulations no [1] 2010 as revised on September 4, 2019.” 

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The new directive took effect on Friday, June 26, 2020. In other words, all the regional banks are expected to have become aware of this development since then. They now have a timeframe of six months to establish their presence in the geopolitical zones outside of where they currently operate.

It should be noted that prior to this time, regional banks in the country typically operated in at least two geopolitical zones of the federation. However, in line with the new expansion, the CBN shall now prescribe an additional geopolitical zone for each of these regional banks, thereby making the coverage area three geopolitical zones per regional bank.

Meanwhile, the CBN said the aim of this directive is to expand the reach of the regional banks across the country, whilst ultimately promoting financial inclusion. Note also that the new directive affects all regional banks, both the ones engaged in commercial banking and non-interest banking. Some part of the circular said:

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“Effective the date of this circular, all banks with regional authorisation shall be required to operate from one additional geopolitical zone as may be prescribed for each institution by the CBN, without prejudice to the existing requirement of the minimum of two (2) geopolitical zones of the federation. The essence is to promote spread and balance of the regional banks across the country.

“The compliance timeline to establish operational footprint at the advised zone shall not exceed six (6) months from the issuance of the regulatory advice to each regional bank by the CBN.”

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Economy & Politics

Nigerian and US Authorities battle former Enron Nigerian Subsidiary over $80 million Yacht

Both Nigerian and American governments have opposed Enron Nigeria’s appeal. 

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19 years after the bankruptcy of Enron Corporation, one of the biggest corporate bankruptcies in American history, a former subsidiary of the company is battling Nigerian and American Authorities over the sale of a yacht valued at over $80 million acquired by Nigerian businessman Kolawole Aluko. 

The yacht was seized by the US Government in 2018 after prosecutors say it was bought with the proceeds of bribes paid to Nigeria’s former Minister of Petroleum, Diezani AlisonMadueke. 

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The yacht was later auctioned for $37 million in 2019. The Nigerian government also dropped claims to the proceeds of the sale recently and a Texas Court ordered all proceeds should be retained by the US Government. 

However, a former unit of the Bankrupt Enron, Enron Nigeria Power Holdings claims its entitled to the proceeds and demands $22 million in a bid to get an arbitration awarded to them against the Nigerian government for suspending a contract signed with Enron in 1999 to build and operate a Power plant. 

(READ MORE: Nigeria leads Africa combined in Q2 2020 on BTC P2P)

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Enron Nigeria claims the Nigerian government dropped claims to the proceeds of the yacht’s auction in an attempt to fraudulently transfer assets to stop creditors from accessing them. Saying Nigeria dropping its claims was a recognition of the factual and legal basis” in a DOJ court filing. 

Both Nigerian and American governments have opposed Enron Nigeria’s appeal. 

Enron Nigeria Power Holdings Ltd is owned by ex-Enron staff involved in the negotiations for the Power Plant contract in Nigeria and was bought out of bankruptcy for $750,000 in 2004 by a Cayman Islands registered company. 

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An arbitration ruling in 2012 awarded Enron Nigeria Power Holdings $11.2 million including interest in damages against the Nigerian government. 

The DOJ says Mr. Aluko bought the yacht for $82 million in 2013 and funded a lavish lifestyle for Alison Madueke in exchange for NNPC contracts valued at over $1.5 billion. 

Aluko and his business partner, Olajide Omokore are also accused of laundering illicit revenues into and through the United States

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