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Border closure to slow down economic growth in 2020

Whilst the CBN’s policy may have positively impacted on Nigeria’s third-quarter GDP growth rate, the Federal Government’s decision to keep the borders closed until January 2020 is expected to slow down economic recovery, particularly in the trade sector.

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Closure of Nigerian borders: The positives and the negatives

Analysts at RenCap, an investment and securities firm declared that the closure of Nigeria’s land borders could lead to a slow-down in Nigeria’s economic growth in 2020. This was contained in an economic research report recently released by the company.  

According to RenCap, Nigeria’s economic growth of 2.3% recorded in the third quarter of 2019 wasmainly on the back of a recovery in the oil and gas sector, and to a lesser extent financial services,” with the oil sector growing by 6.5% year on year in the third quarter of 2019.  

The research firm also explained that the growth recorded in the oil sectorwas largely due to an increase in oil production to 2.04mn b/d, from 1.93mn b/d,” while “Financial services also emerged from its slump and grew, albeit modestly, by 0.6% YoY in 3Q19, after declining for four consecutive quarters,” suggesting that the CBN’s policy played a major role. 

[READ ALSO: This new report from McKinsey ranks Nigeria among least performing economies.(Opens in a new browser tab)]

“We think that the Central Bank’s directive to banks to increase their loan-to-deposit ratios (LDR) to 65%, as part of a bid to boost economic growth, partly explains the increase in lending. The pick-up in credit growth to 10.9% YoY in September, from 4.3% YoY a year earlier (see Figure 3), maybe in part attributed to this directive. The telco industry remains the biggest contributor to GDP growth, albeit a tad smaller. The sector grew by a brisk 12.2% YoY in 3Q19, a little slower than 15% YoY a year ago.”  

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Border Closure drags GDP: Whilst the CBN’s policy may have positively impacted on Nigeria’s third-quarter GDP growth rate, the Federal Government’s decision to keep the borders closed until January 2020 is expected to slow down economic recovery, particularly in the trade sector.  

[ALSO READ: Experts laud Google’s decision to offer banking services (Opens in a new browser tab)]

  • Nigeria’s trade sector is about the second largest contributor to Nigeria’s GDP but has suffered from poor economic growth since Nigeria’s economic crisis began in late 2014. “We believe the border closures contributed to the decline in wholesale and retail trade in 3Q19” RenCap explains. 
  • “Trade’s decline partly explains the slowdown in the non-oil sector’s growth to 1.8% YoY in 3Q19, from 2.3% YoY a year earlier. Trade contracted by 1.5% YoY vs 1.0% growth a year earlier. As trade is the second-biggest economic sector, its performance has material implications on GDP growth. Trade declined despite a pickup in consumer confidence.”  RenCap
  • Unfortunately, growth may remain farfetched for the trade sector if the borders remain closed next year.  “We believe the pick-up in inflation, on the back of the border closures, will undermine confidence and demand in subsequent quarters. This will also counter the positive impact of improving credit growth, resulting in a neutral impact on GDP growth.” 

[READ ALSO: This new report from McKinsey ranks Nigeria among least performing economies.(Opens in a new browser tab)]

The recent inflation report released by the National Bureau of Statistics also revealed that  Nigeria’s inflation rate rose by 11.61% year on year in October 2019the highest in about 18 months. The rise was largely attributed to an increase in the cost of food items following the closure of the borderto cheaper imported goods.  

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With the full effect of the closed borders still being contemplatedNigeria’s 4th quarter GDP numbers could be severely impactedespecially if the trade sector continues to cave under pressure from government policies.

A slew of government policiesranging from border closure to the ban of 41 itemshave negatively affected the sector. The Buhariled government has focused on growing the local industry, backing the unpopular policy direction with executive orders such as the border closure, import-substitution, increase in import tariffsetc.  

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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Economy & Politics

Uganda Elections: Museveni re-elected for 6th term with 58.6% of the votes

Uganda’s President Museveni has won a 6th term in office as the opposition alleges wide-scale rigging.

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The President of Uganda, Yoweri Museveni, has been re-elected as President, gathering 5.85 million votes compared to 3.48 million votes by main opposition leader, Robert Kyagulanyi, a.k.a Bobi Wine.

According to Reuters, this victory represents 58.6% of the vote cast while Bobi Wine got 34.8%

Bobi Wine announced that the election results show this is the most fraudulent election in the history of Uganda and urged his followers to reject the result.

What you should know

  • Yoweri Museveni, aged 76, has been President of the East African nation since 1986.
  • Bobi Wine claimed via his official Twitter handle that military men jumped over his fence and took control of his home yesterday.

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Coronavirus

Combined Vaccine Manufacturing capacity to hit 6.8 billion doses in 2021

COVID-19 vaccine manufacturing capacity is expected to hit 6.8 billion doses in 2021.

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Covid-19: First world nations oppose waiving intellectual rights for vaccine development

Meristem Group disclosed that the combined effort in manufacturing COVID-19 vaccines for global use is expected to yield about 6.8 billion doses in 2021.

This was revealed in the Annual Outlook 2021 report presented by Meristem Group, titled Bracing for a different future.”

According to the report, the existing manufacturing capacity will only be sufficient enough to immunize about 44% of the global population, which would create obvious vaccination gap and make the pandemic last longer than necessary.

The report states,

  • The cold temperature requirements for vaccine storage pose major logistics concern particularly in Sub-Saharan Africa and other low-income countries. WHO estimates that about 50% of vaccines are wasted every year, largely due to a lack of temperature control.”

According to the report, the estimated 6.8billion doses are expected to be collaboratively manufactured as follows:  CanSino – 0.2billion, AstraZeneca – 3.0 billion, Gamaleya – 0.3billion, Moderna – 0.4billion, Pfizer-BioNtech – 1.3billion, SinoPharm – 1billion, and SinoVac – 0.6billion.

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What you should know

  • The global population as of 2020 is 7.8billion and 70% is required to achieve herd immunity (otherwise called herd protection)
  • Herd Immunity or herd protection is achieved when you have most of the population immunized against an infectious disease.
  • 2 doses of the vaccines are required for each person for immunity.
  • It is expected that between 11 and 15 billion doses would be required to achieve the desired herd immunity, globally.
  • From all indications, herd immunity may not be achieved until mid or late 2022, with the subsisting 100% vaccine production capacity utilization in 2021 – with neither production nor distribution losses.
  • To achieve regulatory approval, a vaccine must undergo a three-stage clinical development process after the exploratory and pre-clinical stages and the U.S Food and Drug Administration (FDA) sets a phase 3 efficacy benchmark of 50%.

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Coronavirus

Covid-19: Global deaths surpass 2 million

Global casualty record for the Covid-19 pandemic surpassed 2 million deaths on Friday.

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Nigeria blows past 40,000 COVID-19 cases

The Global casualty record for the Covid-19 pandemic surpassed 2 million deaths on Friday, with the United States accounting for 1 in every 5 deaths, as it has recorded over 386,000 casualties so far.

This was disclosed in a report by Reuters in its Covid-19 tally reported on Friday evening.

After the United States, Brazil, Mexico, India and the U.K contribute nearly 50% of the combined casualties.

The report also disclosed that an average of 11,900 casualties are recorded per day in year 2021, despite the fact that it took 9 months for the world to record 1 million casualties.

United Nations Secretary-General, Antonio Guterres, said the 2 million death count was “a heart-wrenching milestone.”

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  • “Behind this staggering number are names and faces: the smile now only a memory, the seat forever empty at the dinner table, the room that echoes with the silence of a loved one,” he added.

The WHO warned that 2021 could be tougher due to the nature of new variants which transmit the disease faster.

  • “We are going into a second year of this. It could even be tougher given the transmission dynamics and some of the issues that we are seeing,” WHO Chief, Mike Ryan, said.

Analysts expect the global death toll to surpass 3 million by April 2021.

What you should know 

  • Nairametrics reported that the total number of covid-19 cases in Nigeria had surpassed the 100,000 mark on Sunday 10th January 2021, according to the Nigeria Centre for Disease Control.
  • The African Union stated that it secured 270 million Covid-19 vaccine doses for the continent from drug manufacturers to supplement the COVAX programme, a step towards the commencement of the complex task of vaccinating over 1.2 billion people with limited financial resources.
  • The Nigeria Centre for Disease Control on Friday 15th January 2021, announced that 1,867 new cases of the covid-19 virus were recorded across 24 states in the country. This represents the highest number of cases recorded in a single day.

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