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Nigeria exits recession as economy grows 0.11% in Q4
Nigeria's economy has technically exited the recession as the economy grew by 0.11 per cent in the fourth quarter of the year. However, cumulatively in 2020, the economy contracted by 1.92 per cent. Tunde Adama, Head of Trading at Citi Nigeria joins CNBC Africa for more.
Thu, 18 Feb 2021 14:09:05 GMT
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AI Generated Summary
- Nigeria exits recession with 0.11% growth in Q4, providing hope for economic recovery.
- Global oil market dynamics support Nigeria's economic stability and growth prospects.
- Central Bank's debt conversion strategy raises questions about Nigeria's debt ratio.
Nigeria's economy has shown signs of recovery as it technically exited the recession with a growth of 0.11% in the fourth quarter of 2020. While the cumulative lead in the Nigerian economy contracted by 1.92% throughout the year, the positive growth in Q4 has brought hope for the country's economic outlook. Tunde Adama, Head of Trading at Citi Nigeria, provided insights into the GDP numbers and discussed the impact on Nigeria's capital markets. The Q4 GDP numbers have been viewed positively by analysts, who had anticipated a better performance than the previous quarter. Despite various disruptions such as the #EndSARS protests and security challenges, the economy started to normalize in Q4, leading to an unexpected growth of 0.11%. This growth has fueled optimism for a more robust economic performance in the coming year.
The global oil market dynamics have also played a crucial role in Nigeria's economic recovery. With Brent crude prices projected to reach $60-61 per barrel, Nigeria stands to benefit significantly from the demand recovery and positive oil market trends. The partial lockdowns in many parts of the world have suppressed demand, but as economies gradually reopen, there is expected to be a surge in oil demand, further supporting Nigeria's oil-based economy. The recent shift in oil prices from the lows observed last year to the current levels has provided a strong foundation for Nigeria's economic stability.
Additionally, the Central Bank of Nigeria's move to convert the N10 trillion CBN financing into longer-term debt instruments has raised questions about the country's debt ratio. This strategy aligns with global practices of economic intervention to stimulate growth and maintain stability. By formalizing the temporary facility into a long-term debt arrangement, the CBN aims to support the government's fiscal requirements and ensure economic continuity. While the market reaction to this development is still being assessed, analysts are closely monitoring its impact on interest rates and market dynamics.
In the recent auction on February 1, there was notable demand from the market, indicating a sense of cautious optimism among investors. Despite the slight increase in yields and the adjustment in foreign exchange rates, investors are observing market trends before making significant moves. The government bond auction saw strong participation, with the Government Ministry of Finance stepping in to cover the shortfall in bids. This transitional phase in the market reflects a period of adjustment and uncertainty as investors navigate through evolving economic conditions.
The positive growth in Nigeria's economy in Q4 2020 has instilled confidence in the country's economic recovery journey. With favorable oil market projections, strategic debt management, and cautious market sentiments, Nigeria is poised for a promising economic outlook in the coming year.
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