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MAN  calls on FG to adopt proactive measures restart economy

By Charles Nwaoguji

The Manufacturers Association of Nigeria, MAN, is expecting government to adopt proactive measures to restart the fragile economy which is significantly hit by COVID-19.

In its review of the economy in the second half of 2019, the Association carried out what it called Manufacturers CEOs Perception Index computed from a survey of over 400 manufacturing companies in Nigeria for the 4th quarter of 2019 which stood at 51.9 points.

The survey showed it scored 51.7 point in 3rd quarter; 50.9 points sin 2nd quarter; and 51.3 in first quarter of 2019.  The scores of the index over the quarters suggest that manufacturers only have marginal confidence in the economy in the year.

The National Bureau of Statistics (NBS) GDP report also showed that the country’s national output grew in real terms by 2.55 percent in the fourth quarter of 2019 as against 2.38 percent growth recorded in the corresponding period of 2018; thereby indicating 0.17 percentage point increase over the period. It also grew 0.27 percentage point when compared with 2.28 percent growth of the preceding quarter. Growth in the economy averaged 2.27 percent in 2019, a figure that is 0.27 percentage points better than the 2 percent growth rate projected by IMF.

Also, Non-oil sector output grew in real terms by 2.26 percent in the fourth quarter of 2019 from 2.70 percent growth recorded in the corresponding quarter of 2018; thus indicating 0.44 percentage point decrease over the period.  It however increased by 0.42 percentage point when compared with 1.84 percent growth recorded in the preceding quarter.

Meanwhile, the Oil sector grew by 6.36 percent in the fourth quarter of 2019 from -1.62 percent recorded in the corresponding quarter of 2018; representing a 7.98 percentage point increase over the period.  It however decreased by 0.13 percentage point when compared with 6.49 percent recorded in the preceding quarter. On an annual basis, oil recorded 4.59 percent growth in 2019, higher by 3.62 percentage points when compared to 0.97 percent recorded in 2018.

According to National Bureau of Statistics (NBS), Manufacturing sector real output growth stood at 1.24 percent in the fourth quarter of 2019 as against 2.35 percent recorded in the corresponding period; thus indicating 1.11 percentage point decline over the period.  It however, increased by 0.14 percentage point when compared with 1.1 percent growth achieved in the third quarter of 2019.

Similarly, World Inflation Rate for 2019 decelerated to 3.41 percent in 2019 from 3.62 percent estimate of 2018, but to increase to 3.56 percent in 2020 according to

statista.

Meanwhile, Inflation in Nigeria has been decelerating since March 2017 but tended up in the fourth quarter of 2019. Inflation rate in the country closed at 11.98 percent in December owing to rise in food inflation. The continuous reduction in inflation rate was halted in September owing to increasing food inflation that arose on account of closure of land borders.

The Association reported that following the global trade tension, contraction in global output and financial tightening, particularly in the emerging economies, some countries had to vary its monetary measures to accommodate the shock while some others left their unchanged.

The Federal Reserve Bank of US reduced its interest rate 1.5 percent in December 2019 from 1.75 percent of the previous month; Bank of England’s Monetary Policy Committee in tis December 2019 meeting maintained Monetary Policy Rate at 0.75 percent to meet the 2% inflation target and help to sustained growth and employment; Euro Area retained it at 0.25 percent in the period; just as   Bank of Japan maintained it policy rate at -0.1% since September 2019. Nigerian Monetary Policy Committee retained MRP at 14 percent in the last quarter of 2019 intended to management economic stability and growth

According Central Bank of Nigeria (CBN) Maximum Lending rate slowed to 30.23 percent in the fourth quarter of 2019 as against 30.52 percent recorded in the corresponding quarter of 2018. It also decreased by 0.95 percentage point when compared with 31.18 percent recorded in the preceding quarter. Notwithstanding the marginal drop in the Maximum Lending Rate (MLR), the lending rate remain unbearably high in the country.

Prime Lending rate stood at 14.99 percent in the fourth quarter of 2019 from 16.17 percent recorded in the corresponding quarter of 2018; thereby indicating 1.18 percentage point decrease over the period.  It also decreased by 0.35 percentage point when compared with 15.34 percent recorded of the preceding quarter.

According to OPEC report, Bonny Light crude oil prices was relatively higher than other crude in the international market as it stood at $65.59/b in July 2019; $60.46/b in August; 64.02/b in September; $61.45/b in October; $63.54/b in November; and $68.18/bin December 2019 with a yearly average of $65.61/b. The slowing down of crude prices can be attributed to the declining industrial fuel consumption since the global trade tension began.

The MAN further noted that the WTO trade growth forecast shows that world merchandise trade growth slowed to 2.6 percent   in 2019 from down from 3.0 percent recorded in 2018. Trade growth could then rebound to 3.0 percent in 2020 which is dependent on easing of trade tensions and the control of the Coronavirus pandemic according to the organization.

On Foreign Exchange, MAN reported that in the Inter-bank (official) forex market, exchange rate stood at N306.95/US$ in the fourth quarter of 2019 compared with N306.70/US$ recorded in the corresponding quarter of 2018; thus, indicating a marginal decrease of N0.25/US$ or 0.08 percent depreciation in value over the period. It also depreciated by N0.02/US$ or 0.006 percent when compared with N306.93/US$ recorded in the preceding quarter.

Exchange rate also depreciated marginally in the BDC section of the market, exchange rate stood at N359.42/US$ in the fourth quarter of 2019 as against N362.34/US$ recorded in the corresponding quarter of 2018; thus indicating N2.92/US$ or 0.80 percent depreciation in the Naira value over the period.

It also depreciated marginally by N0.28/US$ or 0.07 percent when compared with N359.14/US$ recorded in the preceding quarter.

Following the relative stability in the forex market, exchange rate premium between Interbank and BDC rate moderated to 17.1 percent from 18.20 percent of the corresponding quarter in 2018; thereby indicating 1.10 percentage point decrease over the period. It however increased by 0.10 percentage points when compared with 17.00 percent recorded in the preceding quarter.

Furthermore, Gross external reserve of the country recorded accretion in the first half before decelerating on a free fall in the second half of the year amidst dwindling investors’ confidence and continuous intervention of the CBN in the forex market. In the second half of 2019, External reserve of the country stood at US$38.07 billion in the fourth quarter of 2019 as against US$42.54 billion recorded in the corresponding period of 2018; thus indicating US$4.47 billion or 10.5 percent decrease over the period.  It also fell by US$2.83 billion or 6.9 percent when compared with US$40.90 billion recorded in the preceding quarter. Nigeria’s External Reserves in the fourth quarter of 2019 covered approximately five (5) months import bills of the country.

 

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