Nigeria’s economy expands in 2nd quarter, ending slump

Nigeria’s economy expanded in the second quarter, finishing its worst downturn in 25 years as agricultural and petroleum output increased.

Gross domestic product of Africa’s biggest crude producer grew 0.55 percent in the three months through June from a year earlier, compared with a revised 0.9-per-cent contraction in the first quarter, the Abuja-based National Bureau of Statistics said in an e-mailed report on Tuesday. The median of 10 economists’ estimates in a Bloomberg survey was for growth of 1.3 percent.

This ends five consecutive quarters of pus which also saw the market decline 1.6 per cent this past year, the first such drop since 1991. The International Monetary Fund forecasts growth of 0.8 percent this year as output of oil increases and supply of foreign exchange, required by manufacturers to import inputs, continues to improve.

“While many will concentrate on the headline move back into positive territory, some of the optimism must necessarily be tempered,” Razia Khan, the head of macroeconomic research at Standard Chartered Bank PLC in London, said by email. “This isn’t in any respect a strong GDP print. It falls far short of the growth rates the Nigerian market needs to be achieving.”

Agriculture, which vies with businesses as the second-biggest contributor to GDP, expanded 3 percent in the quarter from a year earlier, the statistics agency said. Services, the largest sector at 54 percent, contracted 0.9 percent. The petroleum industry climbed 1.6 percent.

Nigerian authorities enhanced foreign-currency liquidity by introducing a trading window for portfolio investors at market-determined prices, and afterwards by allowing commercial banks to estimate the so-called Nafex rate that is now near pricing on the black market. Before this, the central bank frequently intervened to maintain the naira at about 315 a U.S. dollar, even after months of abandoning a 197-199 peg.

The naira weakened 0.9 percent to 358.74 per dollar at 2:48 p.m. in Lagos, the commercial capital.

The central bank has kept its main lending rate at a record high of 14 percent since July, 2016, to encourage the naira and to combat inflation which has been at 16.1 per cent last month, still almost double the target.

Economists including Yvonne Mhango in Renaissance Capital see the central bank continuing a tight monetary-policy stance.

“While rate cuts might be positive for personal credit extension, we believe the following loss of foreign-currency liquidity from reduced prices may hurt the economic recovery,” Ms. Mhango stated by email.

President Muhammadu Buhari, who returned to Nigeria Aug. 20 after over three months of sick leave in London, higher spending to a record 7.4 trillion naira ($25.4-billion Canadian) this past year.

The funding is part of a broader plan to raise the economic growth rate to 7 percent and make 15 million jobs by 2020 by pumping more crude, opening farmlands and increasing infrastructure spending.

Courtesy: The Globe And Mail

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