Business

Nigerian Economy Shrinks By N63bn, 28 Sectors Struggle

Published

2 years ago

August 30, 2022

Editor

Twenty-eight sectors of the economy declined in the second quarter of 2022 as real Gross Domestic Product shrunk by N63.49bn quarter-on-quarter.

While real GDP grew by 3.54 per cent year-on-year in Q2 2022, it declined by 0.37 per cent from the N17.35tn that was recorded in the first quarter of 2021 to N17.29tn in Q2, 2022, according to data from the National Bureau of Statistics, NBS.

The NBS blamed this decline on lower economic activity that was witnessed in Q1 2021. The analysis of real GDP data revealed that only 18 of the 46 NBS captured economic activity sectors experienced growth in the quarter under review.

According to the data from the statistics body, the agriculture sector witnessed mixed positives, with two sub-sectors witnessing growth and the other two recording a decline. Crop production grew from N3.39tn to N3.59tn; livestock declined from N318.49bn to N282.02bn; forestry grew from N44.14bn to N51.28bn; while fishing declined from N125.46bn to N88.3bn.

In the mining and quarrying sector, crude petroleum and natural gas declined from N1.15tn to N1.09tn; coal mining grew from N1.61bn to N4.79bn; metal ores declined from N4.87bn to N1.26bn; and quarrying other minerals grew from N363.29m to N25.51bn.

The 2022 has been a tough year for the manufacturing sector with inflation and foreign exchange scarcity negatively impacting growth. Only three of the 13 subsectors in the manufacturing sector recorded any growth in the quarter under review.

Oil refining grew from N1.66bn to N2.82bn; cement declined from N188.81bn to N143.74bn; food, beverage and tobacco declined from N875.94bn to N760.08bn; textile, apparel, and footwear declined from N342.48bn to N283.34bn; wood and wood products declined from N53.81bn to N44.41bn; whereas pulp, paper, and paper products declined from N13.38bn to N9.70bn.

Chemical and pharmaceutical products grew from N42.75bn to N47.37bn; non-metallic products declined from N63.52bn to N49.24bn; plastic and rubber products declined from N60.12bn to N53.01bn; electrical and electronics increased from N839.34m to N921.50m; basic metal, iron and steel declined from N39.93bn to N37.31bn; motor vehicles and assembly declined from N9.53bn to N7.63bn; and other manufacturing declined from N76.07bn to N55.55bn

The electricity, gas, steam and air conditioning supply sector grew from N32.72bn to N118.79bn. The water supply, sewerage, waste management and remediation sector grew from N39.06bn to N61.12bn. Construction declined from N725.99bn to N554.11bn. The trade sector grew from N2.79tn to N2.91tn.

Accommodation and food services also recorded a decline from N173.41bn to N68.17bn. Under the transportation and storage sector, road transport grew from N151.97bn to N293.85bn; rail transport and pipelines declined from N40.96m to 19.92m; water transport increased from N802.77m to N1.04bn; air transport declined from N25.26bn to N9.69bn; transport services grew from N7.11bn to N11.14bn; and post and courier services declined from N6.26bn to N2.42bn.

Seen as one of the bright spots of the economy, telecommunications and information services under the information and communication sector grew from N2.25tn to N2.59tn; publishing declined from N5.45bn to N4.66bn; motion pictures, sound recording and music production declined from N229.67bn to N157.57bn; and broadcasting grew from N330.47bn to N433.43bn.

The arts, entertainment and recreation sector declined from N35.69bn to N51.85bn. In the financial and insurance sector, the financial institutions subsector declined and insurance declined from N85.11bn to N80.18bn.

The real estate sector was one of the sectors that shrunk, declining from N927.32bn to N920.49bn. The professional, scientific and technical services sector fell from N560.47bn to N525.94bn; administrative and support services grew from N3.39bn to N3.54bn; public administration also grew from N283.59bn to N375.59bn, but education fell from N333.06bn to N231.85bn.

While the other services sector declined from N702.74bn to N473.72bn, the human health and social services sector increased from N126.01bn to N131.28bn.

According to Associate Professor of Economics at the Pan Atlantic University, Olalekan Aworinde, real GDP was the true reflection of the economic status of a country.

He said, “Nominal GDP is the market value of goods and services produced at a particular period. Real GDP is when you have the nominal GDP, and inflation factored in. It is the nominal GDP indexed with inflation.”

In a statement addressing the general GDP, the Founder /Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, disclosed that productivity and competitiveness issues had continued to negatively impact performance across sectors of the economy.

He stated that the general operating environment of the nation was also very challenging for most investors, with SMEs particularly more vulnerable to prevailing macroeconomic shocks, resulting in high mortality rate for small businesses.

He said, “Many businesses are struggling to cope with the numerous challenges and shocks to the economy. On the welfare front, the citizens are also experiencing serious economic hardship as a result of the galloping inflation and the impact on purchasing power.”

PUNCH

Business

BREAKIN: NDIC Increases Maximum Deposit Insurance Coverage

Published

2 days ago

May 2, 2024

Editor

The Nigeria Deposit Insurance Corporation (NDIC) on Thursday increased the maximum deposit insurance coverage levels for Deposit Money Banks from N500,000 to N5 million.

The Managing Director of NDIC, Bello Hassan, announced this in Abuja at a press conference, stating that it takes effect immediately.

He said, “For Deposit Money Banks, the increase of the maximum deposit insurance coverage from N500,000 to N5,000,000, would provide full coverage of 98.98% of the total depositors compared with the current cover of 89.20%.

“In terms of the value of deposit covered, the revised coverage would increase the value of deposits covered by deposit insurance to 25.37% compared with the current cover of 6.31% of total value of deposits.

“The increase of the maximum deposit insurance coverage from N200,000 to N2,000,000, would provide full coverage of 99.27% of the total depositors compared with the current level of 98.76% and would increase the value of deposits covered by deposit insurance to 34.43% compared with 14.38% of total value of deposit, currently covered.

“The increase of the maximum deposit insurance coverage from N500,000 to N2,000,000 would provide full coverage of 99.34% of the total depositors compared with the current 97.98% and would increase the value of deposits covered by deposit insurance to 21.04% compared with 10.77% of total value of deposit, currently covered.”

Hassan also stated that raising the maximum deposit insurance coverage for primary mortgage banks from N500,000 to N2,000,000 would provide full coverage for 99.99% of total depositors and increase the value of deposits covered by deposit insurance to 43.10% of the total deposit value, up from the current 40.60% cover.

The Corporation has also raised the maximum pass-through deposit insurance coverage for subscribers of Mobile Money Operators from N500,000 to N5,000,000 per subscriber.

Business

Dangote Speaks On Devaluation Of Naira

Published

3 days ago

May 1, 2024

Editor

Chairman of Dangote Industries Limited, Aliko Dangote has said that the devaluation of Naira created the biggest mess for the company in 2023.

Speaking at the annual general meeting of Dangote Sugar Refinery, Dangote said this affected lots of companies in the country.

He said: “We are doing whatever it takes to make sure that at the end of the day, we will be paying dividends because if you look at our dividends last year, it was almost 50 percent more so we will try and get out of the mess.

“The biggest mess created was actually the devaluation of the naira from N460 to N1,400. You can see almost 97 percent of the companies, especially in food and beverages businesses, none of them will pay dividends this year for sure but, we will try and get out of it as soon as possible.

“We want to see that at the end of the day, no matter how small, we will be able to pay some dividends, especially if there is a rebound of the naira.”

Business

Customers Panic As CBN Bans Opay, Palmpay, Others’ New Accounts

Published

4 days ago

April 30, 2024

Editor

Some bank customers have expressed panic as the Central Bank of Nigeria bans mobile money operators including fintech firms from onboarding new customers.

However, the Bank Customers Association of Nigeria backed the CBN directive.

The new directive will affect fintech companies such as OPay, Palmpay, Kuda Bank, and Moniepoint, from opening new accounts until further notice.

Reliable sources from three major fintechs who requested not to be mentioned as they were not permitted to speak, confirmed the development to The PUNCH on Monday.

The CBN’s move was linked to an ongoing audit of the Know-Your-Customer process of the fintechs, which have been under scrutiny in recent months over concerns around money laundering and terrorism financing.

It was gathered that the CBN had summoned some of the heads of fintechs to Abuja to discuss issues around KYC last week.

The CBN has not yet publicly commented on the directive to the fintech firms. The PUNCH’s attempts to reach the apex bank for comment were unsuccessful.

Several calls made to the telephone line of the CBN spokesperson, Hakama Ali Sidi, were not responded to as of the time of filing this report.

Also, the directive coincided with the court order that the Economic and Financial Crimes Commission (EFCC) obtained to freeze at least 1,146 bank accounts owned by various individuals and companies allegedly involved in illegal foreign exchange transactions.

The 85-page court order (document), which listed the bank account details suspected to be involved in illicit activities, was obtained by The PUNCH on Monday.

Justice Emeka Nwite, in a ruling on the ex-parte motion, moved by counsel for the anti-graft agency, Ekele Iheanacho, also granted the commission’s application to conclude the investigation within 90 days.

Part of the court document read, “That the applicant’s (EFCC) application is hereby granted as prayed.

“That an order of this honorable court is hereby made freezing the bank accounts stated in the schedule below, which accounts are owned by various individuals who are currently being investigated in a case involving the offenses of unauthorised dealing in foreign exchange, money laundering, and terrorism financing, to the extent that the investigation will be for a period of 90 (ninety) days.”

The EFCC, in the motion marked FHC/ABJ/CS/543/2024 dated and filed April 24 by Iheanacho, was heard by the judge the same day in the interest of national interest.

“The motion was brought pursuant to Section 44(2) and (K) of the 1999 Constitution; Section 34 of the EFCC Establishment Act 2004; Section 7(8) of the Money Laundering Prevention and Prohibition Act, 2022; and under the inherent jurisdiction of the court.”

The President of the Bank Customers Association of Nigeria, Uju Ogubunka, backed the CBN’s move to suspend new account opening on the affected platforms.

He told The PUNCH that the strict regulations that govern deposit money banks must apply to fintechs, and microfinance banks in order to ensure the integrity of the financial institutions.

He said, “Anything that can disrupt the system should not be permitted. If the platforms are being used for things that are against the regulations, I think the CBN decision is OK. I don’t see anything wrong with that. It behoves on the companies now to get their KYC right.

“Let them do what they are supposed to do. KYC applies to banks and other financial institutions that deposit money. It should also apply to them so that the regulators can understand what is going on and hold them accountable.”

On the other hand, Emmanuel Odunsi on X (formerly Twitter) welcomed the move, citing the need for better KYC processes to prevent scams and fraudulent activities.

“Their KYC isn’t that great. Lots of scammers are using their apps to defraud people.

“Most of the accounts were created by mining phone numbers, with subscribers’ permission. Almost every phone number has been linked to an account,” Odunsi said.

In October 2023, Fidelity Bank blocked transfers to OPay, Palmpay, Kuda, and Moniepoint due to concerns around KYC processes.

In response, the CBN introduced new KYC rules for all financial institutions in November 2023, which appeared to target fintech startups.

A source from Moniepoint said the company had complied with the directive, effectively halting new account creation on their platform. However, the source denied having anything to do with KYC.

“It’s just a regulation from the CBN, and we’ve complied. The real question is, why are fintechs always targeted,” he source argued.

“It has nothing to do with KYC; I am aware that the CBN communicated, but this particular issue dwells on accounts related to cryptocurrency transactions,” the source revealed.

The CBN has an ambitious target to increase overall financial inclusion to 95 per cent of the adult population by 2024.

With the new order, the target may be affected, as the company processes about 100 new accounts every day.

The source argued that fintechs had played significant roles in deepening financial inclusion in the country.

The company had deployed robust and reliable digital payment infrastructure that has facilitated an average monthly transaction value of $12bn for about 1.6 million businesses, it said last year.

A senior employee of PalmPay confirmed to The PUNCH that there was a CBN directive for fintechs to reassess their KYC processes.

This is causing a temporary pause in onboarding new customers, the source stated.

She clarified that the KYC review was a collaborative effort with the CBN, and fintechs were awaiting further instructions without a specified timeline for resolution.

Another source at OPay, who also declined to be named, said they were following the CBN’s directive and could not comment further.

“We don’t really have anything to say. It’s just a directive that we are following. The CBN has issued their directive.“

Fintech companies have faced increased regulatory scrutiny over their account opening processes.

Customers worry

However, some customers have also used social media, both on X (formerly Twitter) and Facebook, to express their worries and opinions on the matter.

Some customers are anxious about the safety of their funds, with Warisenibo Jumbo suggesting it’s best to transfer their money out of Opay.

Oye Niran wondered if their Moniepoint account was safe, stating, “Hope my Moniepoint account is safe.”

Larry Leanz questioned the rationale for keeping money on these platforms.

“But is it still safe to keep money there?, Leanz questioned.