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Nigeria may be headed for another recession as economy slows in Q2 2018

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The Nigerian economy has slowed for the second consecutive quarter this year, raising fears the nation may soon be heading for another economic recession.

According to the Gross Domestic Product (GDP) figures released by the National Bureau of Statistics (NBS) on Monday, the rate at which the nation’s economy grew in the second quarter of 2018 slowed to 1.50 percent from 1.95 percent recorded in previous quarter.

The GDP growth rate is the rate at which the value of all goods and services produced within a country’s border in a given period is rising.

Nigerian economy had officially slumped into recession in the second quarter of 2016 after recording negative GDP for two consecutive quarters, according to NBS.

Nigeria, which relies on crude oil for 70 percent for its revenue and over 90 percent for its export earnings, slumped into its worst economic woes since 1987 by recording five consecutive negative GDP growth rates from -0.67 percent in Q1 2016 to -0.91 percent in Q1 2017.

The nation’s annual growth rate turned positive in Q2 2017 with GDP growth rate of 0.72 percent and sustained the positive trajectory for five quarters till Q2 2018.

The economy would enter another recession when the GDP figures turn negative for two consecutive quarters.

Read Also: Nigerian stocks hit 10-month low on Dangote drop, election risk

The data indicated that the oil GDP contracted by -3.95 percent from 14.77 percent in Q1 2018, while non-oil GDP grew by 2.05 percent from 0.76 percent in Q1 2018.

Last week, the Statistician-General of NBS, Yemi Kale, had attributed the downturn to the clashes between farmers and herdsmen in some parts of the country.

The International Monetary Fund (IMF) had projected that the nation’s economy would grow from 0.8 percent in 2017 to 2.1 percent in 2018 and 2.3 percent in 2019 on the back of an improved outlook for oil prices.

According to the global monetary authority, the forecast “reflects improved prospects for Nigeria’s economy” and supported by the increase in commodity prices like crude oil.

With the GDP figures for the two quarters, the nation now has an average GDP of 1.73 percent for the first half of 2018.

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Nigeria targets 1,268MW from new power plants

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Eight brown and green field hydropower projects built through public-private partnerships are expected to yield 1,268 megawatts of electricity, according to the Nigerian government.

It was learned that the Federal Executive Council had authorised the concession of one of the power projects, while three other power projects had already been awarded to concessionaires.

According to a February 2024 document that our correspondent was able to receive from the Federal Ministry of Water Resources and Sanitation in Abuja on Friday, three of the hydroelectric projects had already been finished, while the remaining five were in varying states of completion.

Prof. Joseph Utsev, Minister of Water Resources and Sanitation, delivered the document to the National Council on Water Resources and Sanitation during its thirty-first regular meeting.

With a population of more than 200 million, the nation has struggled with inadequate power generation and supply, with energy companies producing and distributing between 3,000MW and 4,000MW.

With a combined production of 1,338 megawatts, the Kainji and Jebba hydroelectric dams, operated by Mainstream Energy, provide approximately 33% of Nigeria’s current electricity generation of 4,000 megawatts.

The government has been investing in hydropower plants, which are powered by water turbines instead of gas, to help alleviate the situation. Since January of this year, the appalling state of the electricity supply has gotten worse as gas suppliers to gas-fired thermal power plants have stopped supplying the product to the plants because of the $1.3 billion in debt that the electricity producing facilities owe.

In a recent ministry presentation, the minister of water resources said that significant advancements in brown and green field hydropower production through public-private partnerships had been made.

“We have conclusively concessioned some projects while still developing others through various PPP models itemised as follows: concession of the 40MW Dadinkowa Hydropower Project in Gombe State. We have attained financial closure, and the plant is operational, thereby, stabilising the transmission voltage of the North-East of Nigeria.

“Concession of the 30MW Gurara Hydropower Plant in Kaduna State up to financial closure and the plant, which is under rehabilitation, will commence commercial operation in the third quarter of the year 2024.

“Concession of the 40MW Kashimbila Hydropower Plant in Taraba State. The Federal Executive Council approval has been secured, the concession agreement executed and the commencement fee paid by the concessionaire to the special concession account as approved by the Federal Ministry of Finance Budget and National Planning,” Utsev said.

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Tanzania begins fresh round of Treasury bond auctions

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In an effort to reduce national debt and increase the amount of money in circulation in the face of a lack of foreign currency, the Bank of Tanzania (BoT) has started a fresh round of Treasury bond auctions.

Prior to the conclusion of the 2023–2024 fiscal year, the central bank announced plans to reopen 10-year, 15–year, 20–year, and 25–year Treasury bonds. The first event of this plan will be a tender auction for a 20-year bond on February 21 at an interest rate of 15.49 percent.

The bond with the highest interest rate, a 25-year bond, will be reissued on March 6.

According to the BoT’s official auction calendar, at least eight more bond tenders in the four maturity categories will be floated before the end of June, with interest rates starting at 11.44 percent for the 10-year coupon.

Tanzania’s domestic debt was at Tsh30.67 trillion ($12.03 billion) by the end of December 2023, a Tsh485.4 billion ($190.35 million) rise from November, according to the BoT’s monthly review report for January, which was released this week.

According to the report, 75.5 percent or more of the domestic debt stock was made up of Treasury bonds.

Since its debut in April 2021 on the Dar es Salaam Stock Exchange, the 25-year bond has gained significant traction on the DSE, greatly surpassing the popularity of shorter-term options.

According to the report, the most recent auction in December brought in a total of Tsh493.1 billion ($193.37 million) in offers, with Tsh420.7 billion ($164.98 million) coming from winning bids.

The bond will support government initiatives to expand the financial markets in the nation, stretch the maturity profile of domestic debt, and generate money to close budget deficit gaps. It will also act as an anchor for other market instruments, including corporate bonds and mortgage financing.

Its set coupon rate of 15.95%, exemption from withholding tax, and semi-annual interest payment are its main draws.

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