Narrowing GDP contraction
The negative economic growth in Nigeria which started at the first quarter of 2016 has starting narrowing in the first quarter of 2017, indicating that Nigeria is on its way out of recession.
The nation’s GDP report for the first quarter released by the NBS showed that the nation’s GDP contracted by -0.36 in the first quarter of 2016 and the contraction deepened to -1.70 in the second quarter of the same year.
While the first quarter of 2017 marked the fifth consecutive month Nigeria would record economic contraction, the slowing growth is on a reverse gear from the fourth quarter of 2016.
The -0.52 per cent contraction reported by the NBS in the first quarter of 2017 was an improvement from the -1.30 per cent recorded in the fourth quarter of 2016, being the second consecutive contraction narrowing seen in the GDP.
Changes in the GDP are typically considered by economists to be the most important measure of the economy’s current health.
Reversing inflation rate
In February this year, Nigeria recorded first drop in inflation rate in 15 months as the rate slowed by 0.94 per cent from the 18.72 per cent recorded in January to 17.78 per cent in February 2017.
Nigeria recorded third consecutive month of a decline in the headline inflation rate in April, dropping from 17.26 per cent recorded in March to 17.24 per cent in April.
The reversal in the nation’s hitherto skyrocketing inflation rate has been attributed to slumping prices of goods in the market.
The NBS said the continued drop in inflation rate shows “effects of some easing in already high food and non-food prices, as well as favourable base effects over 2016 prices.”
The Manufacturing PMI released by the Central Bank of Nigeria increased to 51.1 in April of 2017 from a record low of 41.90 in June of 2016.
The growth recoded in April was the first expansion in the manufacturing sector after three months of contraction as production rose significantly and new orders grew.
The manufacturing PMI measures the performance of the manufacturing sector and is derived from a survey of purchasing and supply executives from 13 locations in Nigeria.
A reading above 50 indicates an expansion; below 50 represents a contraction; while 50 indicates no change.
The Manufacturing PMI in Nigeria averaged 47.71 from 2014 until 2017, reaching an all-time high of 53 in February of 2015 and a record low of 41.90 in June of 2016 when Nigeria sunk into recession.
The expansion seen in April in in line with the narrowing contraction in GDP and reversing inflation rate, developments indicating a healthier economy.
Improved oil price
International oil price tumbled from more than $100 a barrel in 2014 to under $50 as at the second quarter of 2016, a development that contributed to the contraction seen in the economy.
Nigeria is heavily dependent on oil receipts to fund her economy and the vicissitude in the global oil price hit her bad.
However, at the moment, oil trades above $50 per barrel in the international market, meaning that Nigeria’s oil exports now have higher value than they did in 2016.
Rising oil production volume
As at second quarter 2016, militancy in the Niger Delta had cut oil production from 2.4 million to 1.6 million barrels per day.
The federal government is beginning to achieve some level of stability in the Niger Delta region with the daily oil production now 2 million barrels as announced by the NNPC.
Dogged monetary policy
The Monetary Policy Committee (MPC) at its last meeting held all key monetary policy rates static for the fourth time in a row.
As a result of prevailing production and price risks in the Nigerian economy, the committee kept the Monetary Policy Rate (MPR) at 14 per cent; Cash Reserve Ratio at 22.5 per cent; Liquidity Ratio at 30 per cent; and maintained the Asymmetric corridor at +200 and -500 basis points around the MPR.
The Abuja Chamber of Commerce and Industry (ACCI) told the Daily Trust that economic activities will consolidate on the recent gains in response to MPC decision.
The Chamber said output and prices have already adjusted to the subsisting equilibrium interest rate.
The doggedness in maintaining the monetary policy rates for the fourth time running shows that the committee members are confident that the policies are working.
Power Generation (MW)
Power generation statistics also show that the Nigerian economic is getting healthier by the day, partly fuelled by productivity in the industrial sector.
Data sourced from the Nigeria System Operator (NSO) showed that power generation has increased from an average of 3500 megawatts recorded in April 2016 when Nigeria started having negative economic growth to 4500 megawatts as at April 2017.
The increase in power generation is an indication that more power would be available for industries to increase production and activities in the economy.
Increased productivity will invariably lead Nigeria out of recession and place her on the path of sustainable growth.
Improvement in FX market
The country’s foreign exchange market is beginning to stabilise, with naira to dollar exchange rate crashing from near N500 per dollar as at the end of 2016 to N362 per dollar as at June 5.
The stability has been as a result of increased intervention by the central Bank of Nigeria (CBN) in recent month that had seen huge amounts of dollars being pumped into the market.
Speculators are now being checked and increasingly, many Nigerians can now access foreign exchange for medical bills and school fees abroad.
Resolute fiscal policy
The recently launched Economic Recovery and Growth Plan (ERGP) by the federal government is aimed at pulling the economy out of recession and placing it on the path of sustainable and inclusive growth.
The plan document seen by the Daily Trust targets to create 15 million jobs, achieve 7 per cent GDP rate and a single digit inflation rate by 2020.
A professor of Economics at the University of Uyo, Leo Ukpong, told Daily Trust on Sunday that if well implemented, the plan is capable of turning the economy around in the four-year lifespan of the plan.
The 2017 budget, just like the 2016 budget, is expansionary and ambitious, targeting infrastructural revolution in the economy.
The 2017 budget of N7.44 trillion is expected to fund infrastructural projects worth N2.174 trillion within the one-year budget circle.
The capital expenditure is expected to pump in money into the economy, increase disposable income and further narrow the contraction in the GDP.
Balance of Trade
Data from the NBS have shown that Nigeria’s trade balance is beginning to rekindle hope in the economy as the trade deficit recorded in 2016 has ended.
Nigeria’s merchandise trade statistics showed that trade balance rose to N719.4 billion in the first quarter of 2017 from N671.3 billion recorded at the last quarter of 2016.
Nigeria had exited trade deficit at the last quarter of 2016 after her trade balance hit N671.3 billion, showing an improvement from the negative trade balance of -N136.0 billion recorded in the second quarter of 2016.
This latest positive trade balance represents the second consecutive positive trade balance after 4 quarter of negative trade balance.
The report showed that the total value of Nigeria’s merchandise trade at the end of Q1, 2017 was N5.29 trillion, being 0.1 per cent higher than the N5.29 trillion recorded in the preceding quarter.
As Nigeria’s balance of trade continues to reverse the negative trend seen last year, the country will earn more foreign exchange to strengthen the naira the more.
Ease of Doing Business
The government has introduced sweeping changes in the country’s business environment to ease up the process of doing business in the country, a development that would boost the economy.
The federal government had set up a Presidential Committee on Ease of Doing Business and the committee had made changes aimed at removing difficulties in business registration, procurement process and late submission of budgets.
The ease of doing business being promoted by the present government is geared towards the promotion of transparency and efficiency in the business environment designed to facilitate the ease of doing business in the country; timely submission of annual budgetary estimates by all statutory and non-statutory agencies, including companies owned by the Federal Government; and support for local contents in public procurement by the Federal Government.
The Corporate Affairs Commission has also automated the process of registering business in the country, considerably reducing the time for business registration.
Investors coming to Nigeria to do business can now obtain visa on arrival, a departure from the practice in the past.
An expert in financial and macroeconomic analysis, Mr. Abiola Razaq, told the Daily Trust that from all available indicators, Nigeria will be out of recession by the end of the second quarter of this year.
Mr. Rasaq, who is the Head of Investor Relations at United Bank for Africa Plc, said the indictors are promising and the economy is getting healthier.