Based on the recently released Q1:2019 GDP report, the Nigerian economy expanded at a slower pace of 2.0% Y-o-Y (vs 2.4% in Q4:2018), below both our expectation and analysts’ consensus forecast of 2.5% aggregated by Bloomberg. The moderation in growth was due to a broad-based slowdown across the oil and non-oil sectors. The oil sector contracted for the fourth consecutive quarter at -2.4% Y-o-Y in Q1:2019, deeper than the contraction of -1.6% in the previous quarter.
Few weeks ago, the National Assembly passed the 2019 appropriation bill of the Federal Government into law. This was concluded in record time, considering that May 6 was the earliest time the budget had been passed under the President Buhari administration prior to 2019. Budget deliberations were also less contentious than in the past three years when the executive and legislature had a fractious relationship.
An Economist, Prof. Segun Ajibola, says the allocation of N2 trillion for capital expenditure in the 2019 budget was too low to drive growth and development in the country.
Ajibola said this in an interview with the News Agency of Nigeria yesterday in Abuja, while reacting to the passage of the 2019 Appropriation Bill of N8.92 trillion by the National Assembly.
The budget was increased by the legislature by N90 billion from the N8.83 trillion presented by President Muhammadu Buhari on Dec. 18, 2018.
Since the sharp contraction in government revenues due to the oil price crash of mid-2014, Nigeria’s rising debt profile has raised sustainability concerns. Although government’s revenues have recently been supported by increasing oil prices, stable oil production and improving tax collection, Nigeria’s revenue to GDP still lags pre-oil price crash levels. Based on annualised Q3:2018 revenue data, we estimate that gross revenues was N7.0tn in 2018. While this is the highest revenue collection on record, it is weak relative to GDP at 5.5% compared with 7.8% in 2013.
Global and country-level macroeconomic updates by multilateral institutions continued this week during the spring meetings of the World Bank and the International Monetary Fund (IMF). We had analysed the IMF’s report on the Nigerian economy last week, highlighting economic projections and critical reform areas. This week we review global growth prospects and the World Bank’s Bi-Annual Update on the Nigerian economy.
Global Growth Forecast Revised Downwards to 3.3% in 2019
The World Bank has cut its growth forecast for Sub-Saharan Africa this year to 2.8 percent from an initial 3.3 percent, it said on Monday.
The commodity price slump of 2015 cut short a decade of rapid growth for the region, and the bank said growth would take longer to recover as a decline in industrial production and a trade dispute between China and the United States take their toll.
At the end of the second meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria, which was concluded today, 26th March 2019, the Committee decided, in perhaps the last MPC communique of Governor Godwin Emefiele, on a vote of 6 to 5 to reduce policy rate by 50bps (13.5%) after having held the rate at 14.0% since July 2016. The Committee in an unexpected twist, cited the need to shift policy focus to supporting growth amongst other considerations.
The second meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria will hold between 25th and 26th March 2019. Since the last meeting, global and domestic economic conditions have remained favourable. On the global scene, monetary policy is now accommodative, supporting the return of investors into Emerging and Frontier markets. On the domestic scene, growth has improved, inflation is moderating, and external reserves have strengthened due to a surge in capital inflows post-elections.
This week, the National Bureau of Statistics (NBS) published the Consumer Price Index (CPI) for February 2019. The report shows a surprising slowdown in inflation for the second consecutive month to 11.3% Y-o-Y in February 2019 (January: 11.4%). This is significantly below the analysts’ average estimate of 11.5% reported by Bloomberg. We observe that headline inflation was slower than expected due to lower M-o-M inflation at 0.73% in February (January: 0.74%), the lowest since December 2017.
President Muhammadu Buhari has held a special meeting with members of his cabinet where he told them that the new four-year mandate given to his administration would be tough.
He told them that he would pursue his campaign promises of securing the country, transforming the economy and the fight against corruption.
The cabinet ministers were in the State House, Abuja, on Friday to congratulate him on his electoral victory.