Connect with us
Advertisement
Oando
Advertisement
Alpha
Advertisement
Hotflex
Advertisement
Binance
Advertisement
Advertisement
UBA
Advertisement
Patricia
Advertisement
Access bank
Advertisement
app

Economy & Politics

Why 2020 Q1 GDP is not a surprise

If the Q1 2020 GDP looks too good to be true, it is because it really is. But Q2 results will be a better representative of our challenges

Published

on

Why 2020 Q1 GDP Is Not A Surprise

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.

(READ MORE: Nigerian economy going into recession, might contract by -8.9% – Finance Minister)

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.

Hotflex

Why 2020 Q1 GDP Is Not A Surprise

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.

 

 

Jaiz bank

 

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Business News

Labour set for showdown with FG, rejects plan to reduce salaries

The NLC president demanded an increase in the remunerations and allowances of Nigerian workers.

Published

on

Minimum wage, NLC, Looting by former governors blocks excuses for new minimum wage 

The Organised Labour appears set for a showdown with the Federal Government as they have condemned and rejected the government’s plan to cut down salaries of Nigerian workers.

This follows the recent statement credited to the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, in which she revealed the Federal Government’s plan to reduce the cost of governance by cutting down workers’ salaries.

This disclosure was contained in a statement issued by the President of the Nigeria Labour Congress (NLC), Ayuba Waba, on Wednesday in Abuja, in which he expressed shock and noted that the plan was tantamount to a mass suicide wish for Nigerian workers.

What the NLC President is saying

Waba in his statement said, “The minister also allegedly directed the National Salaries, Incomes and Wages Commission (NSIWC), to immediately review the salaries of civil servants as well as the number of federal agencies in the country.

It is most unthinkable that the government would be contemplating to unilaterally slash the salaries of Nigerian workers at this time.

He added that “The question to ask is which salary is the government planning to slash? It certainly cannot be the meager national minimum wage of N30, 000, which right now cannot even buy a bag of rice.”

The NLC President said that he believed the proposed salary slash was certainly not targeted at the minimum wage and consequential adjustment in salaries that some state governors were still dragging their feet to pay.

He said that the multiple devaluations of the Naira in a short time, and the prevailing high inflation rate in Nigeria had negatively impacted on the salaries earned by Nigerian workers across the board.

He said, “Nigerian workers are only surviving by hair’s breadth. Indeed, Nigerian workers are miracles strutting on two legs.

“It is, therefore, extremely horrendous for a minister of the Federal Republic of Nigeria to pronounce salary slash for Nigerian workers currently. This call for salary slash by Mrs Zainab Ahmed is tantamount to a “mass suicide” wish, for Nigerian workers.”

While demanding an immediate retraction and apology by the Minister of Finance, the NLC president, however, said that if there was any salary that needed serious slashing, it was the humongous remuneration and allowances pocketed by political office holders in Nigeria, who did extraordinarily little but collected so much.

Wabba said, “Workers generate surplus value and revenue for the government. We do not constitute any unnecessary cost or burden to governance. It is also important to make the point that salaries are products of contracts governed by laws. They cannot be unilaterally adjusted.”

This move is not only at great odds with global best responses to the COVID-19 pandemic but also in violation of relevant ILO Conventions and Declarations on Wages and Decent Work. We urge the government as a social partner to quickly respond to the demands by Labour for an upward review of salaries of all Nigerian workers.

Nigerian workers have shown sufficient understanding with the government through the tough patches of the pandemic. Now, Nigerian workers demand reciprocity of our understanding. Nigerian workers demand an increase in their remunerations and allowances.”

Jaiz bank
Continue Reading

Economy & Politics

Lagos places some unemployed graduates on N40,000 monthly salary

The Lagos State Government has announced that it has placed 4,000 unemployed graduates on N40,000 monthly salary for a period of 6 months.

Published

on

Lagos orders removal of all unapproved street gates in the state to ease traffic, Sanwo-Olu to stop pension for former governors, deputies, #EndSARS: Judicial Panel of Inquiry and Restitution to include Lekki toll gate incident – Sanwo-Olu, Lagos approves resumption of all classes in public, private schools, Lagos takes major step towards delivery of Fourth Mainland Bridge, Lagos to construct rail line to airport terminal for international passengers, COVID-19: Lagos State to begin curfew on Sunday to disinfect metropolis, Lagos state government discharges 7 more coronavirus patients, Lagos state will reverse to full lockdown, Sanwo-Olu to virtually inaugurate projects as he presents scorecard of first year in office, Lekki regional road: Sanwo-Olu revokes land titles of Elegushi Royal family, Lagos pays N1.3 billion into the RSA of 246 retirees, Lagos State to empower 2.5 million youths in Arts and Crafts

The Lagos State Government has announced that it has placed 4,000 unemployed graduates on N40,000 monthly salary for a period of 6 months.

The initiative which is implemented through the Ministry of Wealth Creation and Employment’s Graduate Internship Placement Programme (GIPP) is intended to address the challenge of unemployment among unemployed graduates in Lagos State.

This disclosure was made by the Lagos State Commissioner for Wealth Creation and Employment, Mrs Yetunde Arobieke, during the 2021 Ministerial Press Briefing in commemoration of the Second Year in the Office of Governor Bababjide Sanwo-Olu.

Arobieke said the programme, which was planned to last for six months, was meant to expose interns to a particular job, profession or industry and enhance networking.

She pointed out that through this initiative, interns will be given the opportunity to excel and possibly learn a job with the organisation; as they are exposed to professional skills and interpersonal relationships in a structured setting.

What the Lagos State Commissioner of Wealth Creation and Employment is saying

Arobieke said the programme would expose interns to the possible niche of entrepreneurial opportunities and provide an opportunity for the graduates to have employability skills and exposure to today’s world of work.

She said, “The GIPP is meant to assist Micro, Small and Medium Enterprises (MSMEs) and other companies to choose from the state’s database of groomed talent/interns, to enhance productivity and boost their businesses, thereby, promoting economic growth at no cost through the intervention of the state government.

A total of 51,514 graduates applied for the internship online, over 1,932 companies indicated interest to onboard the interns after their training and 4,736 applicants attempted the Online Assessment Test.

Hotflex

About 1,000 candidates who scored a minimum of 60 per cent were invited for the first tranche of the employability skills training, while 4,000 interns are targeted to be placed on a monthly stipend of N40,000 for six months.

You will agree with me that the state government under Sanwo-Olu is leaving no stone unturned in mitigating the unemployment scourge,” Arobieke said.

She said the ministry’s Employability Department, during the period under review, organised youth-focused programmes which included the “Mindset Re-Orientation Programme,” a program aimed at reorientating the mindset of the unemployed youths in facing the realities of the present day labour market.

Going further, she said, “Hence, the need for reorientation of the mindset of the job seekers to imbibe learning vocational and technical skills to be self-employed.”

The 2020 edition of this programme had 2,163 unemployed youths that participated in the webinar with seasoned practitioners in various fields or areas of specialisations as facilitators.

Continue Reading

  





Nairametrics | Company Earnings

Access our Live Feed portal for the latest company earnings as they drop.