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Economy & Politics

Nigeria’s GDP grows by 1.87% in Q1 2020, as non-oil sector weakens

Nigeria’s Gross Domestic Product (GDP) grew by 1.87%(year-on-year) in real terms, representing a drop of 0.23% points compared to Q1 2019 and 0.68% points decline compared to Q4 2019

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Nigeria’s Gross Domestic Product (GDP) grew by 1.87% (year-on-year) in real terms in Q1 2020. This is according to the first quarter (Q1) GDP report, released by the National Bureau of Statistics (NBS) on Monday.

According to numbers contained in the Bureau’s report, the performance recorded in Q1 2020 represents a drop of 0.23% points compared to Q1 2019 (2.10%) and 0.68% points decline compared to Q4 2019 (2.55%), reflecting the earliest effects of disruption caused by Covid-19 pandemic and crash in oil price.

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Oil sector

According to the report, Nigeria’s oil sector recorded a real growth rate of 5.06% (year-on-year) in Q1 2020, indicating an increase of 6.51% points relative to the rate recorded in the corresponding quarter of 2019 (-1.46%).

However, when compared to Q4 2019 which recorded a growth rate of 6.36%, oil sector growth decreased by –1.30% points. The contribution of the Oil sector to aggregate GDP stood at 9.50% in Q1 2020, up from figure recorded in the corresponding period of 2019 (9.22%) and the preceding quarter (7.32%), as the share of the non-oil economy declined.

During the first quarter of 2020, average daily oil production of 2.07 million barrels per day (mbpd) was recorded. The production level was higher than the 1.99mbpd recorded in the same quarter of 2019.

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READ ALSO: FG seeks partnership with National Council of Registered Insurance Brokers, here’s why 

Non-Oil Sector

The non-oil sector grew by 1.55% in real terms during the reference quarter (Q1 2020), this was slower by -0.93% points compared to the rate recorded during the same quarter of 2019 (2.47%), and –0.72% points slower than the fourth quarter of 2019 (2.26%).

According to the Bureau’s report, growth in the non-oil sector was driven mainly by Information and Communication (Telecommunications), Financial and Insurance (Financial Institutions), Agriculture (Crop Production), Mining and Quarrying (Crude Petroleum & Natural Gas), and Construction.

In real terms, the Non-Oil sector contributed 90.50% to the nation’s GDP in the first quarter of 2020, less than its share in the first quarter of 2019 which was 90.78% and the fourth quarter of 2019 recorded as 92.68%. Activities that witnessed weaker performance relative to Q1 2019 include Quarrying, Road transport, Accommodation and Food Services as well as real estate.

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Service, Industry sectors remain resilient as economy posts slowest growth in 6-quarter

Nigeria’s service sector showed strong resilient in the period under review as it contributed 54.39% to the aggregate GDP, up from 53.64% recorded in Q4 2019. Also, the industrial sector recorded a marginal increase in its contribution to GDP at 23.65%, up from 22.25% in Q4 2019. Meanwhile, the contribution from agriculture sector contracted to 21.96% from 25.16% in the previous quarter. The contraction in the agricultural sector is largely traceable to the planting season.

A closer look at the GDP report shows that 1.87% growth recorded in Q1 2020 represents the slowest in the last 6 quarters (2018 Q4 – 2020 Q1). In Q4 2018, GDP growth rose to 2.38% as the economy continued its slow recovery from the 2016 recession.

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The slow growth momentum had been sustained through the subsequent quarters until the latest contraction which is attributable to disruption caused by the Covid-19 pandemic and oil price.

 The Bottom Line

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.

  • It is important to note that while the Nigerian economy contracted slightly in Q1, growth in Q2 is expected to dip largely due to lockdown across major economies of the world which disrupted both supply and demand chain.
  • The Oil sector, Travel and Tourism, Hospitality and Manufacturing are among sectors expected to contract largely in subsequent through 2020
  • According to IMF, the Nigerian economy is expected to contract by -3.4% in the year, as Covid-19 pandemic and oil price shock exacerbate the vulnerability of Nigeria fiscal and monetary landscape.

READ ALSO: Foreign investors ship $21.14 billion to 22 States in 10-month 

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

2 Comments

2 Comments

  1. Okwechime Ogor CFA

    May 27, 2020 at 12:31 pm

    The report reveals that the growth rate of the service sector declined from 2.6% in q4-2019 to 1.57% in the reference quarter. What is the basis for saying that the service sector remains resilient ???

    • Bamidele Samuel Adesoji

      May 27, 2020 at 1:23 pm

      Hi Okwechime, the resilience of the service sector addressed in the article was based on its contribution to GDP. On growth basis, of course it posted a slower growth.

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Economy & Politics

AFCFTA is a powerful tool for Africa’s economic integration – ECA

The pandemic has given African an opportunity to review its poor healthcare infrastructure,

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AFCFTA is a powerful tool for Africa’s economic integration –ECA

The Executive Secretary of the UN Economic Commission for Africa (ECA)Ms Vera Songwe, said the African Continental Free Trade Area (AFCFTA) is a powerful tool to accelerate regional and economic integration in Africa. 

The statement was made during a virtual panel by the African Union marking the Africa Integration for the Continental Free Trade Agreement. 

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She urged that Continental Free Trade Agreement would be Africa’s Marshall plan. Adding that nobody could have predicted the deep effects of the economic crisis on the continent.

“We need to talk about Africa and the AfCFTA. Our Marshall Plan is the AfCFTA. The AfCFTA is our plan, so let us take it and run with it.

 “The Marshall Plan for Europe was about 160 per cent of their GDP traded to bring back growth after the war,” she said. 

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She added that implementation of the AFCFTA, would help the continent have control of its economic future. She added that the UN Economic Commission for Africa forecasts African GDP would decline by 3.2% to -2.8% in 2020 due to the effects of the pandemic. 

(READ MORE: COVID-19: Take-off of Africa Free Trade Zone “AFCFTA” Postponed)

She stressed the need for a continental financial system integration to implement a mutual system of financial stability for sub-Saharan monetary cooperation, while also urging that Africa builds on progress made from implementing The Afreximbank Exchange Facility. 

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 “We need to ensure that as we build the AfCFTA and trade integration, we begin to build stronger, much more robust monetary and fiscal systems that can ensure that as a continent we actually can work with each other in a more effective way,” Songwe said. 

She also urged that the pandemic has given Africa an opportunity to review its poor healthcare infrastructure, citing countries like South Africa, Ethiopia and Morocco developing new healthcare systems. 

Songwe was joined on the panel by Mr Mukhisa Kituyi, Secretary-General of UNCTAD and Mr Benedict Okey Oramah, the President of the African Export-Import Bank (Afreximbank), Mr Wamkele Mene, first Secretary-General of the AfCFTA; Mr Chileshe Mpundu Kapwepwe, Secretary-General COMESA; and Paolo Gomes of AfroChampions. 

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The panelist jointly agreed that the economic crisis due to COVID-19 was an opportunity for Africa to learn lessons on the needs for Industrial developments by producing its own pharmaceutical industry.

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Economy & Politics

Tax debt payments extended to August 31- FIRS

Tax debtors are to liquidate their outstanding tax liabilities on or before August 31.

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The Federal Inland Revenue Service (FIRS) announced it on Wednesday that it has extended the waiver of penalty and interest window on tax debts owned by businesses and individuals from June 30 to August 31, 2020.

In a statement by the Director Communications and Liaison Department, Mr Abdullahi Ahmad. The Executive Chairman of FIRS, Mr Muhammad Nami said the extension is a sequel to palliative measures set up by the FIRS to help businesses and individuals deal with the effects of the Covid-19 pandemic on the economy.

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READ MORE: FIRS to deploy new technology in tax collection, as MDAs refuse to pay 7.5% tax

“The latest extension applies to tax audit, tax investigation and desk review assessments, approved installment payment plans under Voluntary Assets and Income Declaration Scheme yet to be fully liquidated,” he said.

He added that there would not be any extension after the August 31 due date.

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READ MORE: Nigeria Joins Canada, Thailand and others in taxing digital companies

He urged tax debtors to liquidate their outstanding tax liabilities on or before August 31 in order to partake in the waiver of accumulated interests and penalties.

Nami also advised all businesses and individuals who fall under the waivers to contact their nearest FIRS Regional Debt Management Office and tax controllers for further enquiries.

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Economy & Politics

African Union will accelerate industrialization in order to beat COVID-19

AU is planning on improving industrial output through the establishment of the regional value chain.

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Cyril Ramaphosa, Africa Union to accelerate industrialization to beat Covid-19

The African Union says it will accelerate its industrial development drive and improve supply chains needed for Africa’s trade and logistic growth to overcome the pandemic.

In a statement by the chairman of the AU and South Africa’s President, Cyril Ramaphosa, the AU is planning on improving industrial output through the establishment of a regional value chain with the aid of private sector stakeholders. The statement commemorating Africa Integration Day was co-signed by AU Commission Chairman Moussa Faki Mahamat and Mahamadou Issoufou, the president of Niger.

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President Ramaphosa added that the African free trade area is the best tool that can help the continent speed up its regional economic integration to battle the effects of the pandemic. He added that the creation of a free trade area is “defragmenting Africa to put behind us the history of small uncompetitive markets that have thwarted our efforts to achieve inclusive sustainable development for the benefit of our people.”

The African Continental Free Trade Area agreement was signed last year and was meant to commence this year in July but the COVID-19 pandemic has delayed the negotiations for tariff concessions for trade in goods; a date has not yet been announced to resume negotiations.

READ MORE: China exempts some African countries from debt repayment

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When fully ratified and operational by 2030, the ACFTA would be the largest free trade area by land area, servicing a potential of 1.2 billion people and with combined GDP of $2.5 trillion. Of the 54 nations that have signed the agreement, only 28 have ratified it so far. Nigeria is one of the countries yet to ratify over worries of “dumping”. Internal trade in Africa is just 15% compared to Europe’s 70% and Asia’s 58%. The ACFTA when fully ratified will reduce tariffs on goods by 90% and help promote investment and movement of goods, people and capital in the continent.

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