Owing to the novel Covid-19 pandemic, reduced demand in the oil market, and restricted international trade activities, the outlook of the nation’s Gross Domestic Product (GDP) had been expectedly negative.
The International Monetary Fund (IMF), for one, predicted that the plunge in crude prices could cause GDP to contract by 3.4% in 2020, a rate that is by far the highest in at least four decades. The Minister of Finance Zainab Ahmed projected a far worse outcome of an 8% contraction.
As such, when the National Bureau of Statistics on its website on Monday, noted that the country’s Gross domestic product (GDP) expanded by 1.87% in the quarter from a year earlier, many were ecstatic. While the growth, in real terms, represented a drop of 0.23% points compared to Q1 2019 and 0.68% points decline compared to Q4 2019, it has largely been perceived as positive.
For context, the median estimate of three economists in a Bloomberg survey for the quarter was for a 0.8% expansion. However, just before we doff our hats to the seemingly positive growth rate (albeit comparative to projections), here are a few things to bear in mind:
It’s Still A Major Decline
Nigeria’s Q1 GDP of 1.87% reveals that there are indeed challenges that cannot be ignored. Beyond the effect of the pandemic, the oil price wars driven by Saudi Arabia & Russia, have increased the level of uncertainty in the oil market. While the growth rate for the quarter might not have been as bad as expected, the GDP still contracted from the fourth quarter. Also note that in its 2020 budget, the country had significantly cut the benchmark price to $25 per barrel without changing so much in terms of spending, making the nation susceptible to borrowing even more.
We Amped Up Oil Production
A core reason the country’s GDP growth rate was higher than estimated is that it witnessed a four-year rise in oil production. The country had increased its production after crude oil prices started crashing in the first quarter of 2020 as a result of the Covid-19 pandemic as well as the tension between the world’s biggest producers of the commodity. This was in order to curb the crash in income.
Output, consequently, rose to 2.07 million barrels a day, as compared to the 2 million in the fourth quarter and 1.99 million barrels in the first quarter of last year – an output that had not been attained since at least early 2016.
Q2 will be worse
Let’s face it, the pandemic has taken its toll on the Nigerian economy and very little can be done to hide that. However, the impact of the pandemic has not yet been reflected in Q1 results. This is because the economic impact of the pandemic actually commenced in April. If the projections for Q1 were bad, Q2 will be worse – and there are many reasons for this.
Top on the list is that the non-oil economy will likely not offer the solace we need. The statistics office explained that the slowdown reflects “the earliest effects of the disruption, particularly on the non-oil economy.”
With the oil economy down, the non-oil economy had been expected to ease the burden. However, results in ICT and Trade, two main components of the non-oil economy performed below expectations. For one, Trade contracted by 2.82%. Nigeria’s trade sector ranks as the second-largest contributor to Nigeria’s GDP. Consequently, its underperformance has material implications on GDP growth. On the other hand, ICT attained a growth of only 7.65%.
With the typical perils of increasing inflation as well as the continued closure of the border, growth may remain farfetched for the sector. Of course, restrictions in international trade and travel are set to worsen the said outlook. Given the forgoing, there is no gainsaying the fact that bigger challenges will ensue from the second quarter of the year.
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.
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.
Okonjo-Iweala speaks on Twitter’s suspension of Donald Trump
Dr Ngozi Okonjo-Iweala has given her opinion on Twitter’s suspension of US President, Donald Trump.
Twitter board member and candidate for the DG of the WTO, Ngozi Okonjo-Iweala, has said Twitter has rules under which it operates and CEO Jack Dorsey’s statement contains all that needs to be known concerning the suspension of US President, Donald Trump from its platform.
Okonjo-Iweala disclosed this in an interview with Arise TV on Friday evening.
- “Twitter tries to help the public conversation in the world and gives people a means to engage on important issues,” she said.
On the decision to censor Donald Trump
She said the Board agreed as a team to have one voice on the decision to suspend Donald Trump from the service and that CEO Jack Dorsey gave all that needed to be known.
- “Being on the Twitter board, I have to respect our rules for communications on what is happening. I have to be very honest that we as a board agreed that we have a team that will deal with this, to make sure that we have one voice. But, I can tell you that if you want to know why the decisions were taken, please look at the statement by the CEO, Jack Dorsey, I think it tells you all you want to know.
- “Twitter is an organization that has rules under which it operates, and if you read what it puts out, you will see that things are being implemented according to the rules.
On welcoming rules and regulations for the social media giant
- “Let’s wait and see, I don’t want to pre-judge or comment on anything. I don’t want to go beyond what I am willing to say, but let’s wait and see. These are very difficult times in the world. We all saw what happened in the United States. We have to be very careful. We would see what the future would be for the tech companies.”
- Nairametrics reported that social media network, Twitter, permanently suspended U.S President, Donald Trump, citing the risk of further incitement of violence.
- Jack Dorsey, the CEO and founder of Twitter, said that the decision to ban Donald Trump from the social network was the right decision, but one that sets a dangerous precedent.
2021 budget: Lagos to fund deficit of N192.49 billion with internal, external loans
Lagos to fund 2021 budget deficit of N192.494 billion by a combination of internal and external loans.
The Lagos state government has disclosed that it will fund its 2021 budget deficit of N192.494 billion by a combination of internal and external loans.
This was disclosed by the State’s Commissioner for Economic Planning and Budget, Samuel Egube, while presenting the state’s budget for 2021 at a media round table session.
According to him, the total revenue estimate is N971.02 billion, consisting of internal generated revenue (IGR) of N723.81 billion; capital receipts (N71.81 billion); and federal transfer of N175.40 billion.
He said, “The Lagos 2021 budget is made up of N702.93 billion for capital expenditure and N460.49 billion for recurrent expenditure, implying 60:40 capital to recurrent ratio against 2020 budget which was at 55:45 capital to recurrent ratio.
“The breakdown of Lagos recurrent expenditure shows that total personnel cost (N168.72 billion); total overhead costs (N260.07 billion); and debt charges (N31.87 billion).”
Also at the event, Commissioner for Finance, Rabiu Onalapo, stated that the state will local debt instrument through domestic bond issuance to fund the deficit in its 2021 budget.
He said, “The debts are totally tied to capital projects adding that the state’s 19.8% debt to revenue ratio is projected to rise to 22% in 2021.
“This remains below the World Bank and federal government’s benchmarks of 40% and 30% respectively.”
Key Highlights and Projects under the Budget
- Roads and other infrastructure: A provision of N166.579 billion is provided for the construction and maintenance of roads and other infrastructure within the state.
- Traffic Management/Transportation: A total of N93.745 billion was budgeted under the transportation family for Blue and Red rail lines, Junction improvement all around the state, Completion of trailer parks in the state and development of quality bus corridors amongst others.
- Education: The sum of N146.935 billion was budgeted for the education sector. The figure is N10.835 billion higher than the 2020 provision of N136.100 billion.
- Science and Technology: Sum of N23.50 billion is provided for the building and upgrading of IT infrastructure statewide. This consists of N17.131 billion for the Smart City Project. The balance of N6.371 billion is earmarked for the e-GIS Land automation system, single billing system and ease of tax payment/levels among others.
What you should know
Babajide Sanwo-Olu, governor of Lagos, signed the 2021 Appropriation Bill into law on December 31, 2020.
This month, the Lagos State Government projected a monthly target of N60.318 billion Internally Generated Revenue (IGR) for the 2021 fiscal year.