Business
Nigeria’s economy largest in Africa as rebasing boosts GDP to $405bn
ABUJA – In about three weeks from now, when the National Bureau of Statistics (NBS) releases the rebased Gross Domestic Product (GDP) it will show that Nigeria has overtaken South Africa as Africa’s largest economy, which will have great economic and geopolitical implications.
This is according to emerging markets focused investment banking firm Renaissance Capital, whose team of analysts were in Abuja, over the weekend.
“We are revising up our estimate of Nigeria’s GDP by 53 percent. The NBS has nearly completed its work, and our new estimate is that a 45 percent to 60 percent uplift is likely, and we are taking 53 percent as the mid-point figure. We expect the data in January,” said Renaissance Capital analysts led by Charles Robertson, its global chief economist and head of macro strategy, in a research report released yesterday (Dec 18).
“This means Nigeria, at $405 bn in 2013 would be the largest economy in Africa, ahead of South Africa at around $370 bn.”
Other impacts of the rebasing include the possible reduction of growth rates to 5 – 6 percent from 6 – 7 percent, and an increase in GDP per capita to $2,400 from around $1,700, in essence moving Nigeria into middle income economy territory.
“Sectors that may show the biggest upward revision range from Nollywood to IT and telecoms, while we think agriculture will shrink from around 40 percent of GDP to 25 – 30 percent of GDP,” said Robertson.
The rebasing will show public debt shrinking to 13 percent of GDP from 20 percent of GDP. Public external debt would be below 2 percent of GDP, while the current account surplus may still be 5 percent of GDP which will leave the sovereign in a good position to borrow if needed.
According to Rencap “In a Fed tapering world, these revisions make Nigeria look good, but credit rating upgrades (Ba3/BB-) are likely to be constrained by the most competitive presidential elections Nigeria will have seen since democracy returned in the 1990s.”
The NBS is seeking to change the calculations of Nigeria’s GDP, using a new base year of 2010 to give a better indication of the size and composition of its economy.
Most governments overhaul GDP calculations every few years to reflect changes in output and consumption, such as telecoms, financial services and internet usage, but Nigeria has not done so since 1990 (about 23 years) suggesting that the previous GDP framework underestimated economic activity.
The numbers will have new implications for investors and the geopolitics of Nigeria’s place in Africa.
“We would be very surprised if recent and pending investment decisions are taken on the basis of the 1990 national accounts,” said FBN capital research analysts led by Gregory Kronsten, in a note released in August.
“The new GDP series will however be tracked by potential investors, such as suppliers of consumer goods and services,” Kronsten said.
Nigeria already hosts the second largest debt and stock markets in Africa, behind South Africa.
Its stock market is valued at $77 billion, while the secondary market bond trading volumes, ”certainly exceed those of Egypt and Morocco and represent around 20 percent of South Africa’s turnover,” according to Samir Gadio, an emerging markets strategist, at Standard Bank, in London.
Overall – Nigeria’s debt, budget and current account ratios will look among the best in Africa and in the emerging markets (EM), once the rebased figures are released, notes Robertson.
“We like Nigeria in the coming quarter – though we see domestic bond yields up a little, at around 13.5 percent on average. Nigeria is going to rise from 14 percent of MSCI frontier markets to around 20 percent in May 2014 which could attract equity investors wanting exposure to frontiers and/or Africa. We expect the NGN to remain at 160/$ until June 2014. But we are still nervous for the second half of 2014,” Robertson said.
– BUSINESS DAY
The Central Bank of Nigeria (CBN) has issued a stern warning to Deposit Money Banks (DMBs) over the illegal sale of mint Naira notes to currency hawkers.
The apex bank, in a circular signed by the Acting Director of Currency Operations, Mr. Solaja Olayemi, on Friday, emphasized that erring banks would face stringent penalties.
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As part of its efforts to curb the abuse of the national currency, the CBN announced plans to conduct nationwide checks to seize mint notes sold by hawkers.
Banks found to have released such notes will be required to pay a fine of 10% of the value of the affected cash withdrawn from the CBN on the date in question.
Subsequent violations will attract an additional penalty incrementally increased by 5%.
The CBN also reiterated its commitment to enforcing the Clean Notes Policy, warning that banks involved in hoarding, diversion, or any actions that disrupt efficient cash distribution would face appropriate sanctions.
With the festive season fast approaching, the apex bank urged DMBs to enhance internal controls to ensure transparent cash distribution.
It highlighted the need for proper utilization of Automated Teller Machines (ATMs) to ensure easy access to new notes by the public.
Furthermore, the CBN disclosed plans to intensify its mystery shopping and spot checks, working closely with law enforcement agencies to clamp down on any practices that undermine the integrity of the Naira.
Nigeria’s inflation rate surged to 33.88% in October 2024, up from 32.7% in September, according to the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS) on Friday.
The month-on-month increase of 1.18 percentage points marks yet another strain on the nation’s economy, with transportation and food costs cited as the main drivers of inflation.
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Steep Year-on-Year Increase
Compared to October 2023, when the inflation rate stood at 27.33%, the October 2024 figure reflects a significant rise of 6.55 percentage points. This sustained upward trend highlights the worsening cost-of-living crisis for Nigerians.
Month-on-Month Breakdown
Inflation on a month-on-month basis also showed an uptick, rising to 2.64% in October 2024 from 2.52% in September. The faster rate of price increases further underscores the growing economic pressure on households.
Food Inflation Soars to 39.16%
Food inflation, a major component of the headline rate, reached 39.16% in October 2024, up from 31.52% in the same month last year.
The increase was driven by higher prices of staple items, including: Cereals and Tubers: Guinea Corn, Rice, Maize Grains, Yam, Water Yam, and Coco Yam. Oils and Fats: Palm Oil and Vegetable Oil. Beverages: Milo, Lipton, and Bourvita.
On a month-on-month basis, food inflation rose by 0.30 percentage points to 2.94% in October, up from 2.64% in September.
Price hikes in Palm Oil, Vegetable Oil, Fish, Meat, and Bread categories were major contributors.
Annual Food Inflation Hits 38.12%
The average annual food inflation rate over the past 12 months climbed to 38.12%, a sharp increase of 11.79 percentage points from the 26.33% recorded in October 2023.
The consistent rise in inflation, particularly food and transportation costs, continues to erode the purchasing power of Nigerians.
The Manufacturers Association of Nigeria (MAN) has expressed the view that support of both Nigerians and the government for the Dangote Refinery, would enable the giant refinery to perform optimally.
It added that such support will also serve as an impetus for other investors to invest in the downstream sector of the petroleum industry in Nigeria.
The President of MAN, Otunba Francis Meshioye, who made the call after a tour of the Dangote Petroleum Refinery, Petrochemical Complex and Fertilizer Plant advocated that Nigerians and the government should do all they can to support the multi-billion-dollar company, which he described as a source of pride and a gift not only to Nigeria but also to the African continent and the whole world.
He described the Dangote Refinery as a game-changer in the Nigerian oil and gas industry, saying that it is not only creating jobs and driving economic growth but also contributing to our nation’s energy security and self-sufficiency.
According to him, the project is quite inspiring, and he admired the inspiration of the promoter of the project, Aliko Dangote.
He said, “To have been inspired to establish this facility is very magnificent, it is the first ever in Africa and the first ever of such refinery in the whole world. It has many first, first and first.”
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The company has the capacity to produce all our needs locally, petroleum, and other similar products: no one would come to the facility and he would not be inspired or encouraged to ensure that all the support that the company requires should be given to it.
The MAN President said the government should do all that is humanly possible to ensure that the facility works Optimally. “It is prudent and expedient that the necessary supports are given to the company for the economic benefits of Nigeria.
“If the facility can produce 650,000 barrels of crude per day and Nigeria is producing far above this volume per day, she should give the facility all crude it needed to produce”.
He noted that apart from the fact that the facility can give Nigerians what they need locally, the excess will be exported, and when they are exported, the country benefits because it will earn foreign exchange for the government.
“So, whichever way we look at it, the facility requires the government’s support to be able to operate optimally. We have seen the laboratory which is in a class of its own. It is first among equals around the world. It is functioning very well. It is a complex on its own.
“With this kind of facility that starts from quality control to quality assurance, just to ensure that the harmful effects of the products are at zero level, what can be greater than this? This is very unique and I will encourage all stakeholders to give maximum support, and not by the way support, but maximum support.
“I cannot see anything that is lacking in this company, we have been here since morning and went through all the units. The facility can deliver products between 1760 trucks to 1800 trucks per day. So if you have such several trucks going out of the facility a day to various destinations in Nigeria, so many people will benefit from it. There will be more jobs, many families will be comfortable because of the jobs this will create, many artisans will benefit and it will have a spillover effect on so many sectors of the economy.
“If they can produce AGO, gasoline and Jet A fuel, this is good and the government should have no reason not to ensure the facility gets its backing to carry out its activities, because it is going to benefit massively,” he added.
The MAN boss who stated that his organization is an advocacy group, said to a large extent it will support the Dangote Refinery by pushing its case with the government, and also solicit the support of necessary government agencies that can ensure that it operates fully.
The association, he said, always discusses with the government issues that affect its members and it has always listened to it , and always finds solutions to those issues, stating further that Dangote Refinery’s case will not be different.
“The sheer scale and ambition of this project is truly impressive, and we applaud the vision and determination of the Dangote Group in making this refinery a reality.
As manufacturers, we understand the importance of reliable and affordable energy in driving our businesses forward. The Dangote Refinery will undoubtedly have a positive impact on the entire manufacturing value chain, providing a reliable source of fuel and petrochemical products that are essential for capacity utilisation and value addition.
“I believe that the success of the Dangote Refinery serves as an inspiration to all of us in the manufacturing sector. It demonstrates what is possible when we combine innovation, technology, and investment to create world-class facilities that benefit the entire nation,” he asserted.
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