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Nigeria’s GDP slows to 1.94% in Q2 2019, as non-oil sector contracts

Nigeria’s GDP slows to 1.94% in Q2 2019, as non-oil sector contracts

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Nigeria’s Gross Domestic Product (GDP) grew by 1.94% in real terms, in the second quarter (Q2) of 2019, down from 2.10% growth recorded in the first quarter (Q1). This means the economy declined by 0.16% points in the quarter.

According to the data just released by the National Bureau of Statistics (NBS), the Nigerian economy grew by 1.94% in Q2 2019, when compared to the corresponding growth of 1.50% in Q2 2018. This indicates an increase of 0.44% points between Q2 2018 and Q2 2019 (year on year).

Growth overview: A quick breakdown shows that the Oil sector grew by 5.15% from contraction in the previous quarter, while Non-oil GDP slowed down by 1.64% in Q2 2019.

  • According to the report, Nigeria’s aggregate GDP stood at N34.9 trillion in nominal terms, an increase of 13.83% over the performance posted in Q2 2018.
  • In Q2 2019, a total of 15 activities grew faster in Q2 2019 relative to last year, while 13 activities had higher growth rates relative to the preceding quarter.
  • For half-year 2019, real growth in the first half of 2019 stood at 2.02%, higher than the 1.69% which was obtainable in 2018.

The Oil Sector: In Q2 2019, the oil sector of the Nigerian economy posted a strong performance with a 9.10% point increase relative to the rate recorded in the corresponding quarter of 2018.

  • Notably, the oil sector grew by 5.15% in the second quarter of 2019, as against the dip of -1.46% suffered in Q1 2019. This indicates an increase of 6.61% points in Nigeria’s oil sector.
  • In terms of contribution, the oil sector contributed 8.82% to total real GDP in Q2 2019, up from 8.55% recorded in the corresponding quarter.
  • However, the sector’s contribution to GDP went down when compared to Q1 2019.

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The Non-Oil Sector: The Bureau’s report shows that Nigeria’s non-oil sector contracted in Q2 2019. The non-oil sector grew by 1.64% in real terms during the quarter under review. This was –0.40% points lower than the 2.05% recorded in the same quarter of 2018, and -0.83% point lower than the first quarter of 2019.

  • During the quarter, the growth in the non-oil sector was driven mainly by sectors which include Information and Communication, Mining and Quarrying, Agriculture, Transportation and Storage, as well as Other Services.
  • In terms of contributions to GDP, the non-Oil sector remains the biggest contributor to GDP.
  • The sector contributed 91.18% to the nation’s GDP, lower than the share recorded in the second quarter of 2018 (91.45%), but higher than the first quarter of 2019 (90.78%).

Key Sectors’ performance: The growth of the Nigerian agricultural sector slowed down in the Q2 2019 when compared to Q1. Specifically, the sector grew by 1.79%, down from 3.17% posted in the previous quarter.  This means the sector declined by –1.38% points.

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  • On the other hand, the agricultural sector’s contribution to GDP improved to 22.82%. Although this is lower than the contribution in the second quarter of 2018 (22.8%), it is higher than the first quarter of 2019 which stood at 21.89%.
  • The manufacturing sector also contracted by –0.13% (year on year), lower than the corresponding quarter of 2018 and Q1 2019. The growth rate of the sector, on a quarter-on-quarter basis, stood at –4.41%.
  • The manufacturing sector’s contribution to real GDP in Q2 2019 was 9.10%, which is lower than 9.29% recorded in Q2 2018 and 9.79% recorded in the first quarter of 2019.
  • Overall, the nation’s industrial sector grew significantly at 2.01% in Q2 2019. This is the biggest growth the sector posted in six quarters.
  • Meanwhile, the service sector also contracted, the sector grew at 1.94%, lower than 2.06% posted in Q1 2019, but higher than 1.46% growth recorded in Q2 2018.

The Key takeaways: GDP is Nigeria’s biggest economic data, and it measures the monetary value of everything produced in the country. It depicts the nation’s total economic activity. A decline in GDP means major economic activities are slow or sluggish, which may be a result of several factors.

  • For the latest data, the economic growth of 1.94% shows an improved performance when compared to the second quarter of 2018 (1.50%). According to NBS, the slight improvement in GDP was likely aided by stability in oil output as well as the successful political transition.
  • However, the 1.94% GDP suggests the economy behaved sluggishly within the quarter. Expectations were high for the economy to post a better growth performance from the 2.10% recorded in Q1 2019.
  • Another downside is the agricultural sector. In the previous quarter, the agricultural sector posted the biggest growth across the major sectors. However, the sector dipped in Q2, slowest in 4 quarters.
  • Meanwhile, the industrial sector posted some positives as it posted the biggest growth for the past six quarters.

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

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Companies

Abbey Mortgage Bank Plc projects N60.13 million profit in Q1 2021

Abbey Mortgage Bank Plc has projected a Profit after Tax (PAT) of N60.13million in its 2021 Q1.

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Abbey Mortgage Bank announce the appointment of substantive Managing Director, and 5 Directors.

Abbey Mortgage Bank Plc has projected a Profit after Tax (PAT) of N60.13million in its 2021 Q1.

According to the earnings forecast issued by the bank and seen by Nairametrics, it projected the 134.7% Q-o-Q rise from a loss of N173.49 million recorded in its most audited financial statement for Q3, 2020.

key highlights of its earnings forecast for Q1 2021 when compared with Q3 2020 figures include;

  • Pre-tax profit increased to N88.4 million, +151.5% Q-o-Q.
  • Interest income increased to approximately N515.9 million, +55.45% Q-o-Q.
  • Net operating income increased to N421.94 million, +79.9% Q-o-Q.
  • Interest expense increased to N208.06 million, +63.95% Q-o-Q.
  • Operating expenses declined to N333.52 million, -17.9% Q-o-Q.
  • Credit loss expense increased to N19.83 million, +100% Q-o-Q
  • Gross earnings of N649.83 million
  • Taxation of N28.3 million
  • Other income of N133.84 million.

Bottom line

Despite recording not too impressive results in its last financial statements, the firm is, however, optimistic going for Q1 2021 as reflected in its forecast.

This optimism might be premised on the news of a positive general economy by Q1 2021, which will trickle down to various sub-sectors of the economy.

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Economy & Politics

Nigeria needs $3trillion in 30 years to reduce infrastructure deficit – Osinbajo

Vice President Yemi Osinbajo has stated that Nigeria will need $3trillion in the next 30 years to reduce its infrastructural deficit.

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Solar, FG to slash import duties on tractors, buses, others in 2020 Finance Bill, Nigeria will not issue Eurobonds, says Vice President Yemi Osinbajo, FG guarantees mortgage loan to low income buyers at low interest rate, FG inaugurates gold refinery project in a landmark event

The Vice President, Yemi Osinbajo has said Nigeria will need $3trillion in the next 30 years to reduce its infrastructural deficit.

He disclosed this while featuring at a webinar organized by the Bureau of Public Enterprises (BPE).

Osinbajo told the webinar that Nigeria needs to adopt new models of investments for infrastructural developments because relying on public expenditure alone is not sustainable.

READ: How digital transformation will impact Nigeria’s projected $8.79 billion economic expansion

The seminar discussed the roles of Public-Private Partnership (PPP) in developing Nigerian infrastructure. The Vice President said Nigeria still face a huge infrastructural deficit, despite government investment which is a roadblock to rapid economic growth.

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The Federal Government recognizes this fact, which is why we are considering other approaches to complement and boost financing for the development and maintenance of infrastructure in Nigeria.

READ: Nigeria’s Broadband subscriptions peak at 82.7m – Prof. Danbatta

“It is clear that this deficit can only be made up by private investment. Private sector is 92 per cent of GDP, while the public sector is mere 8 per cent. So, the synergy between the public and private sector through Public-Private Partnerships (PPP) is really the realistic solution.

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“The fact that only N2.49 trillion was appropriated for capital expenditure in 2020, reflects the importance of deliberate and pragmatic action to boost infrastructural spending.

READ: #EndSARS: Infrastructure and Works, Education, 3 others are prioritised in Lagos’ 2021 budget

“It seems to me to be quite clear that the financial outlay and management capability required for infrastructural development and service delivery outstrip the financial and technical resources available to government.

“In other words, the traditional method of building infrastructure through budgetary allocations is inadequate and set to become harder because of increasingly limited fiscal space,” he said.

READ: FEC okays FMBN’s request to purchase banking application software for N487.39 million

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He revealed that the FG has launched a series of PPP’s to enable Nigeria meet its infrastructure deficit needs, citing the roles of agencies like the BPE with PPP’s.

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The Federal Government has recently issued a circular on the administration of PPP projects in the country to provide the much-needed clarity.

READ: AfDB to support FERMA with $10 billion for roads, others 

“The circular re-emphasises that the BPE shall be responsible for the concession of public enterprises and infrastructure already listed in the First and Second Schedules of the Public Enterprises Act.

“The circular equally stipulates that the BPE shall act on behalf of the Federal Government, as the counterparty on all infrastructure projects being developed on a PPP basis,” he said.

READ: CBN launches Private Sector-led Accelerated Agriculture Development Scheme

He disclosed that the Infrastructure Concession Regulatory Commission (ICRC) would continue to act as the regulatory agency for PPP transactions, with directives including inspections and monitoring PPP projects.

“It is expected that this new policy direction would provide clarity to stakeholders and foster the improvement of PPP programmes in the country.

“Ministries, Departments and Agencies, as well as the multilateral agencies and our development partners are urged to support the PPP policy objectives and institutional arrangements already put up by government,” he said.

READ: FG says vehicle owners to pay N250,000 to convert from petrol to autogas

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What you should know 

  • Nairametrics reported last month that Moody Investors Services revealed that Nigeria needs to spend about $3 trillion in over 30 years to bridge the infrastructural gap experienced in the country.
  • The Minister of Works and Housing, Babatunde Raji Fashola, revealed that the Federal Government needs at least N500 billion annually for the next 3 years to develop and fix its 35,000 kilometres road network, as work continues on 13,000 kilometres of the network.
  • Nairametrics also reported last month that the FG approved the establishment of an infrastructure company that will be wholly focused on critical infrastructural investments in the country.

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Tech News

Stripe plans corporate banking services for merchants, vendors

Stripe Inc is partnering with American elite banks in offering corporate-banking services to its merchants and vendors.

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Stripe plans corporate banking services for merchants, vendors

Stripe Inc, one of the most valuable start-ups on this planet, is partnering with American elite banks such as Goldman Sachs Group Inc. and Citigroup Inc. in offering corporate-banking services.

This is as the fast-rising startup, known for simplifying payment, seeks to diversify its business offering, amid a competitive ecosystem that includes PayPal, Visa, Mastercard, Adyen.

READ: MainOne Cable: A decade-old journey to bridging the digital divide in West Africa

What this means

Stripe, best known for handling millions of online businesses and e-commerce web pages, will soon start offering some of its client’s interest yielding bank accounts, debit cards, and other cash-management services, according to a report credited to WSJ.

However, these service offerings listed are for its merchants and vendors that do business with Stripe.

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READ: Edlyft raises over $1.4 million venture capital during pandemic

  • Recall Nairametrics revealed how Stripe had raised $600 million to invest and acquire payments companies in developing nations. It disclosed that Nigerian startup, Paystack, had been on Stripe’s bucket list for a while since 2018 when Stripe led an $8 million funding round for it.
  •  Stripe acquired Paystack for an undisclosed deal believed to be worth over $200 million, making it the biggest fintech startup acquisition to date to come out of Nigeria, as well as Stripe’s biggest acquisition to date.

READ: America’s biggest food delivery app, DoorDash seeks for IPO approval

Patrick Collison, CEO of Stripe, spoke on the company’s strategy at the time it acquired Paystack. He said:

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“Stripe thinks on a longer time horizon than others, because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050.”

He added that Stripe also planned to understand the ecosystem and keep its eyes open so it would see where help was needed, as the company did not tie up its investments into “complicated strategic investments.”

READ: Kaduna Inland Dry Port woos more partners with better service delivery ahead of 2021

READ: Nigeria owes foreign airlines $53 million as proceeds from ticket sales – IATA

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