Nigeria not out of recession yet – NBS

.Says economy contracted by 0.52 percent in Q1

…..As MPC retains MPR at 14%, CRR 22.5, LR 30%

Contrary to reports from the World Bank and the International Monetary Fund (IMF) that the Nigerian economy would come out of recession in 2017, the National Bureau Statistics on Tuesday contradicted these projections as it released the Gross Domestic Product (GDP) report for the first quarter of 2017, which showed that the economy contracted by 0.52 percent year-on-year.

However, the NBS postulates that this particular contraction of 0.52 percent is the best performance in four quarters, compared to revised 1.73 percent contraction in Q4 of 2016 and 0.67 percent in Q1 2016.

According to Yemi Kale, the Statistician General of the federation, many sectors of the economy turned positive but failed to get the country out of recession.

In August 2016, NBS reported Nigeria’s first recession since the return of democracy in 1999 which the economy shrank by 2.06 percent in the second quarter of 2016 to hit its lowest point in nearly three decades.

According to the report, the oil sector saw a boost in its fortune as it contributed 8.9 percent of the country’s GDP, as against the 6.75 percent in the fourth quarter of 2016.

The non-oil GDP grew by 0.72 percent to record the best performance in four quarters, when compared to -0.33 percent in Q4 2016 and -0.18 percent in Q1 2016.

Despite this performance, the contribution of the non-oil sector to GDP declined by nearly two percent from 93.25 percent in Q4 2016 to 91.10 percent.

Transport services GDP contracted by 4.01 percent in Q1 2017 from -2.63 percent in Q4 2016 and 2.23 percent in Q1 2016.

The NBS report however, pointed that the key growth activities were led by quarrying (52.54%), metal ores (40.79%), road transportation (12.35%), water supply and sewage (12.63%), fishing (5.49%), crop production (3.5%), oil refining 93.01%), motion pictures (2.95%), telecommunication (2.89%), forestry (2.59%), amongst others.

The food index component, however, rose to 19.30 per cent in April, from 18.44 per cent in March and 18.53 per cent in February, 2017.
The moderation in headline inflation in April, 2017 thus reflected the decline in the core component to 14.80 per cent in April from 15.40, 16.01, and 17.87 per cent, respectively in March, February and January, 2017.

Month-on-month inflation moderated to 1.60 per cent in April from 1.72 per cent in March, 2017.

But the Presidency on Tuesday while acknowledging that the economy remains in recession, as stated by NBS, said however that the latest figures by NBS is the strongest performance in five quarters and shows a significant turnaround from the low of -2.34% reached in the third quarter of 2016 (Q3 2016).

The Presidency in a statement signed by Presidential Adviser on Economic Matters, Dr. Adeyemi Dipeolu, described the figures as an encouraging indication of a steady, even if slow progressive pace, showing that the Nigerian economy is emerging out of recession.

The statement further reads: “The latest figures released by the National Bureau of Statistics show that the economy shrank by 0.52% in the first quarter of 2017 (Q1 2017).

“Although the economy remains in recession, this is the strongest performance in five quarters and shows a significant turnaround from the low of -2.34% reached in the third quarter of 2016 (Q3 2016).

“This is nearly two percentage point improvement and also reflects the fact that the number of sub-sectors that experienced negative growth has almost halved falling from 29 sub-sectors for the whole of 2016 to 16 sub-sectors in Q1 2017.

“Agricultural growth remained in positive territory albeit growing at a slower rate of about 3.4%, no doubt due to seasonal factors.

“Growth in manufacturing on the other hand returned to positive territory after five quarters of negative growth. It grew by 1.36% in Q1 2017 after falling to a nadir of -7.0% in Q1 2016.

“The solid mineral sector continued to justify the priority given to it by the Federal Government with high double digit growth for metal ores and quarrying at 40.79% and 52.54% respectively.

“Growth in the oil sector remained negative at -11.64% although there was an over six percentage point improvement in its fortunes from the previous quarter.

“More significantly, the non-oil sector which accounts for about 90% of GDP returned to positive growth although at a marginal level of 0.72% in Q1 2017. This is the first positive growth in the non-oil sector since the last quarter of 2015.

“Headline inflation fell for the third month in a row to 17.24%, with core inflation also declining quite rapidly.

“However, food inflation remains of concern as it continues to trend upwards. This is mainly due to rising transport costs and other structural impediments to the movement of foods in the domestic market. The trade balance remained positive reflecting import contraction and relatively higher export revenues which grew year-on-year by up to 80.5%.

“The overall picture that the figures show is that the economy is emerging slowly out of recession.

Meanwhile, the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, said that he has firm believe that the country will exit recession by the end of third quarter of 2017.

Emefiele said this on Tuesday while briefing journalists at the end of the Monetary Policy Committee Meeting of the bank in Abuja.
He also said that he wanted to end the spread between the black market and official foreign exchange rates, adding that the recent rise of the naira versus the dollar showed that the apex bank’s policies were working.

The CBN governor observed that headline inflation (year-on-year) moderated for the third consecutive month, falling to 17.24 per cent in April, from 17.26 per cent in March, 17.78 per cent in February and 18.72 per cent in January 2017, effectively reversing the monthly upward momentum since January, 2016.

Again, the Monetary Policy Committee of the CBN on Tuesday voted to retain the Monetary Policy Review, MPR, at 14 per cent; Cash Ratio Reserve, CRR, at 22.5 per cent; the Liquidity Ratio at 30.00 per cent; and the Asymmetric corridor at +200 and -500 basis points around the MPR.

According to the apex bank governor, available data and various forecasts of key economic variables as well as assessment of government initiatives, including the recently released Federal Government Economic Recovery and Growth Plan (ERGP), all point to prospects of recovery in 2017.

“The Committee expects that the timely implementation of this plan, judicious execution of the approved 2017 Budget and sustenance of the new foreign exchange implementation regime supported by the restoration of security in different parts of the country, especially, in the Niger Delta region, would help accelerate growth and restore confidence in the economy,” he stated.

The Committee noted the positive effects of improved foreign exchange management on the performance of the manufacturing sector and other economic activities.

The committee noted that money supply (M2) contracted by 8.48 per cent in April 2017, annualized to a contraction of 25.44 per cent in contrast to the provisional growth benchmark of 10.29 per cent for 2017.

Net Domestic Credit (NDC) grew by 1.40 per cent in April, 2017, annualized to 4.21 per cent, which is significantly below the 17.93 per cent provisional growth benchmark for 2017. However, net credit to government grew by 24.08 per cent over end-December 2016, representing an annualized growth of 72.0 per cent.

The MPC, therefore, urged the fiscal authorities to expeditiously commence the implementation of the recently approved 2017 budget, especially, the capital expenditure portion, in order to sustain the momentum of recovery, engender employment and restore confidence in the Nigerian economy.