ThinkBusiness Today - May 25th

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All three economic recessions in Nigeria’s history were under President Buhari

How will you remember President Muhammadu Buhari?

Well, there is a Guinness World Record (GWR) of his that I don’t think anyone has documented yet – He is Nigeria’s only President that has presided over the country’s periods of economic recession – not one, not two, but three economic recessions in 1984, 2016 and 2020.

(See Analysis below).

Markets

• The Nigeria Stock Market continued its upward trend as the benchmark NGX All-Share Index (ASI) moved up 306.41 (0.58%) points to close at 52,927.60, representing a 1-week gain of 0.66%, a 4-week gain of 2.56%, and an overall year-to-date gain of 3.27%. The positive sentiment in the market on Wednesday was largely driven by the buying interest in stocks such as Nestle PLC (9.98%), ACCESSCORP (6.19%), BERGER (5.3%), SEPLAT (7.13%).

• Crude oil prices rose for a third consecutive day early on Wednesday, after gains on Monday and Tuesday, on decline than expected inventory levels in the US. In early morning trade in Europe, Brent Crude was up above $78 per barrel, at $78.03, rising by 1.63%. The U.S. benchmark, WTI Crude, had risen by more than 1.81% and traded at $74.23.

• The Naira strengthened at both the I&E window and parallel market. It appreciated by 0.14% to close at N464.42/$ at the I&E window and strengthened at the parallel market by 1.18% closed at N750.71/$

  Cooler temperatures this week and a dip in available wind power this month are boosting the demand outlook for June for natural gas, leading to nearly 3% price gains to US$2.29 on Wednesday.

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National Headlines

• The MPC raised rates for the 7^th time in just over a year – The CBN’s Monetary Policy Committee (MPC) raised rates for the 7^th time since March 2022 to reach 18.5%. This is smallest increase (0.5%) since the return to orthodox monetary measures by the Bank to deal with high and sticky inflation in the economy, a sign that the Bank rate rise is starting to peak. The rate is also the highest since the adoption of the Monetary Policy Rate (MPR) in 2006 when it replaced the Minimum Rediscount Rate (MRR) (See Analysis yesterday). The next MPC meeting will hold July 24 and 25.

• Poorer and Poorer Nigerians – The National Bureau of Statistics (NBS) released the latest data on Nigeria’s growth trajectory yesterday. As expected, following severe cash transaction challenges earlier this year, Gross Domestic Product (GDP) was 2.31% y/y in Q1 2023, compared to 3.11% and 3.52% in Q1 2022 and Q4 2022, respectively. (See analysis of Nigeria’s growth trajectory under President Buhari below).

Global Headlines

• First rating shot – As the date for calamity in the US and global economy draws close if the US debt ceiling is not raised, Fitch has fired the first rating shot, putting the largest economy in the world’s AAA rating on negative watch. The negotiations between the US President Joe Biden and the House Speaker Kevin McCarthy remains around government expenditure – what and how much to cut or not. In 2011, S & P downgraded the US credit rating for the first time in history, raising borrowing costs. Meanwhile, the US has never defaulted on its debt.

• Milk prices up in India – Did you know India is the largest milk consumer in the world? Prices of milk, consumed by Indians in different ways – milk, yoghurt, ice cream etc., has gone up by 15% in 15 months, according to CNBC reports. The price increases have come on the back of contagious cattle diseases and increases in feed costs. Cattle feeds, largely from corn, wheat, and rice have seen spikes in prices following the Russia / Ukraine war. According to Knoema, milk production in Nigeria was 531,587 thousand tonnes in 2021, with an annual growth of about 2% a year.

News Analysis - All three economic recessions in Nigeria’s history were under President Buhari

Yesterday, the National Bureau of Statistics (NBS) released the final GDP growth data before President Buhari leaves office on the 29th of May. It is symptomatic of his presidency that the Q1 2023 of 2.31%, compared to 3.52% in Q4 2022 was self-inflicted – cash crunch.

Nigeria’s GDP and Oil Price Dynamics 2014 - 2023

From the data and graph above, President Buhari presided over an average quarterly growth rate of 1.3% in 8 years, compared to an estimated 2.4% annual growth rate in population. Every child born under the Presidency of President Buhari has been born in a poorer Nigeria than when he or she was conceived.

The data also shows that President Buhari presided over two cycle of economic recessions – 20016 and 2020, both driven by declining oil prices. In 2016, the economy contracted by 1.6%, recording the first recession in the country since 1984. Therefore, Nigeria has recorded only three economic recessions since record began, and they have all been under President Muhammadu Buhari – what an economic record!

The quarter-on-quarter growth gives a better description of the yoyo dynamics of growth under President Buhari. As depicted by the figure below, the M-shaped pattern of quarterly growth has not changed in the last 8 years.

The Yoyo Nigeria’s Quarterly GDP Growth 2014-2023

Next week Monday, when Nigeria will have a new President in Asiwaju Bola Ahmed Tinubu, the preoccupation of his government should be macroeconomic stability. The measures must be credible, and the plan clear to Nigerians, investors, and the financial system. It is then that we can begin to attract both domestic and international investments and begin to climb up again after a disastrous eight years under President Buhari.