Economic and Financial Update Second Quarter, 2018

ECONOMIC AND FINANCIAL UPDATE Second Quarter, 2018

1.0. Introduction The Global economic upswing that began mid-2017, remained resilient against all negative forecasts. The International Monetary Fund (IMF) in the World Economic Outlook, published in January 2018, predicted a moderate growth rate for the second quarter, 2018 before decelerating towards end of the period under review. Nevertheless, the growth momentum sustained throughout the quarter against all odds. Robust growth was experienced in advanced economies, developing economies and even emerging economies. The growth momentum witnessed in the period under review was attributed to several factors; such as the effect of landmark tax reform bill signed into law by the United States President; boom in the world oil market; bullish trend in the global stock market and robust agricultural production. In Nigeria, the sustained growth momentum experienced in the second quarter, 2018 was attributed to uptick in the non -oil sector especially, Information & Communication industry. However, economic experts warned that, the positive trajectory experienced in the second quarter 2018 could decline, due to political tension of the imminent 2019 general election. On April 27, 2018, the Central Bank of Nigeria (CBN) signed a $2.5 billion Currency Swap Agreement with the Peoples Bank of China. The agreement was to provide enough foreign currency liquidity to Nigerian and Chinese industrialists and assist both Nigeria and China in foreign exchange reserve management. These policy initiatives among others affected/determine the outcome of the performance indices of the economy during the quarter under review. 2.0. The Global Economy The world economy continued on its roller-coaster ride through out second quarter, 2018. The Global economic growth forecast for the period under review was revised upward to 3.9 percent by 0.2 percent, because of developments in the world economy such as the United States tax policy changes. President Donald Trump, signed the landmark tax reform bill into law on 22 December 2017. However, economic experts opined that bill as (perhaps) the biggest tax cuts and reform in the history of United States; prior, IMF warned against the economic consequence of brewing protectionist measures among major economies of the world. In April 2018, the prediction manifested in a series of tariffs and counter tariffs among US and its numerous trading partners. The result was decrease in export orders, and waned confidence among car exporting countries, including Germany. 2.1. US Economy US economy grew at an annualized 4.1 percent in the second quarter of 2018, well above an upwardly revised 2.2 percent expansion in the first quarter, consistent with earlier growth trajectory economic forecast. The period under review was the fastest growth rate recorded in the US since the third quarter of 2014 amid higher consumer spending and soybean exports, while business spending slowed. The spectacular performance of US economy in second quarter 2018, prompted the Federal Reserve to raise interest rates in June. Economic experts forecast further hiked in US interest rates for succeeding months. The US economy recorded its best economic performance in over three years in the second quarter 2018. This was attributed to tax cuts and strong consumer dynamics. Growth peaked in May, as mounting trade disputes intensified risks moderated growth. Average retail sales growth in the second quarter reached a 6-year high, supported by robust consumer fundamentals and an improved labor market throughout the quarter. Further detail on the economic performance of the US is graphically illustrated in chart 1. 2

Chart I: United States Quaterly GDP Growth Rate Source: Trading Economics 2.2. Chinese Economy The Chinese economy grew by 1.8 percent quarter-on-quarter in the second quarter of 2018, compared to a 1.4 percent expansion in the previous quarter, surpassing market estimates of a 1.6 percent growth. It was the strongest quarterly expansion since September 2017. Gross domestic product (GDP) growth rate in China recorded 1.81 percent from 2010 to 2018, reaching an all-time high of 2.40 percent in the first quarter of 2011 and a record low of 1.30 percent in the first quarter of 2016. See chart II for China s quarterly growth rate details. Chart II: China s Quarterly Growth Rate Source: Trading Economics 3

2.3. Japanese Economy The Japanese economy expanded by 0.5 percent quarter-on- quarter in the second quarter 2018. This was after a 0.2 percent contraction in the previous quarter, it beat market expectation of a 0.3 percent growth, as shown by preliminary estimates. It was the highest growth rate since the third quarter of 2017, boosted by a strong rebound in household consumption and upsurge in business spending. In the second quarter, positive contribution to GDP growth came from private demand (0.5 percentage points), private consumption (0.4 percentage points) and capital expenditure (0.2 percent). At the same time, public demand and changes in inventories were neutral, while net exports had a negative contribution of 0.1 percentage points. Private demand increased by 0.7 percent in the second quarter, reversed from a 0.4 percent fall in the first quarter, driven by a rebound in private consumption (0.7 percent vs -0.2 percent in first quarter) which was way above expectations of a 0.2 percent rise. Capital expenditure expanded by 1.3 percent, higher than a 0.5 percent growth in first quarter and far above forecasts of a 0.6 percent gain. It was the steepest increase in business spending since the first quarter 2015. Meanwhile, public demand improved by 0.2 percent, compared to a 0.1 percent contraction in the first quarter 2018. The rebound was supported by a pick-up in government consumption (0.2 percent vs flat reading in the first quarter), while public investment declined by 0.1 percent (vs -0.4 percent in first quarter). Exports of goods and services grew by 0.2 percent (vs 0.6 percent in first quarter), the slowest increase since the second quarter of 2017. Imports climbed 1 percent (vs 0.2 percent in first quarter). Chart III Presents Graphical Illustration of Japan Quarterly GDP Growth Rate. Chart III: Japan s GDP Growth Rate Source: Focus Economics 4

2.4. Eurozone Economy The Eurozone economy expanded by 0.4 percent in the second quarter 2018, same pace as the previous period and above a preliminary reading of 0.3 percent growth. Latest upward revision came after Germany, the bloc's largest economy, recorded a better-than-expected 0.5 percent expansion in the second quarter. However, after a string of sub-optimal data and low core inflation, the European Central Bank (ECB) announced that interest rates would not go up until at least the summer of next year. Although, it was confirmed that, Eurozone quantitative easing would terminate by end of the year. Among countries with available data, GDP growth improved, recorded as follows: Germany (0.5 percent vs 0.4 percent in Q1), Netherlands (0.7 percent vs 0.6 percent) and Portugal (0.5 percent vs 0.4 percent). GDP growth remain unchanged, in France (at 0.2 percent), Belgium (at 0.3 percent), Lithuania (at 0.9 percent) and Slovakia (at 1 percent). Meanwhile, GDP expanded at a slower pace in Italy (0.2 percent vs 0.3 percent); Spain (0.6 percent vs 0.7 percent), Finland (0.5 percent vs 1.2 percent), Austria (0.5 percent vs 0.9 percent), Latvia (0.8 percent vs 1.5 percent) and Cyprus (0.8 percent vs 1 percent). A sharp increase in Italian government borrowing costs, in reaction to the potential risk of fiscal largesse from the new government, left Italian equities as a notable underperformer in the period under review. Compared to the same quarter of the previous year, the Euro Area economy expanded 2.2 percent in the second quarter 2018, following a 2.5 percent growth in the first quarter 2018 and beating a preliminary estimate of 2.1 percent. Considering the European Union as a whole, GDP growth was unchanged at 0.4 percent quarter-on-quarter; and eased to 2.2 percent year-on-year (vs 2.4 percent in the first quarter). Eurozone GDP growth is shown below in Chart IV. Chart IV: Eurozone GDP Growth Source: Focus Economics 2.5. The UK s Economy The United Kingdom economy grew by 0.4 percent on quarter in the second quarter 2018. It followed a 0.2 percent expansion in the previous period and outperformed market expectations. Household consumption grew to 0.3 percent in the second quarter 2018, from 0.2 percent in the first quarter 2018. Gross fixed capital formation increased by 0.8 percent, a rebound from 1.3 percent contraction in the first quarter. This was driven by upsurge in business investment of 0.5 percent as against -0.4 percent recorded in first quarter and private dwelling investment of 1.1 percent as against 1.5 percent. Also, government spending advanced by 0.4 percent, the same pace as in the previous quarter. Imports of goods and services dropped by 0.8 percent as against -0.2 percent in first quarter and exports slumped 3.6 percent. As a result, the trade deficit widened sharply to 7.244 billion from 3.174 billion in the previous period. Chart V Presents Graphical Illustration of UK s Quarterly GDP Growth Rate. 5

Chart V: UK s GDP Growth Rate Source: Trading Economics 2.6. Latin America Economies Reportedly, Latin America s economic momentum froze in the second quarter, due to political turbulence in key economies against uncertain economic backdrop. Regional GDP (excluding Venezuela) was expected to expand by 2.0 percent annually in the second quarter, a notch above first quarter s 1.9% increase. Higher commodity prices buttressed growth in commodity-exporting countries, while healthy consumption supported activity in Mexico. Acceleration was moderate considering first quarter s growth reading weighed in by adverse calendar effects, which dissipated in the second quarter. Economic slack persisted in the region, especially in major countries like Argentina and Brazil. Preliminary figures for Mexico revealed that the economy gained speed in the second quarter, despite political uncertainty in the run-up to the 1 July 2018 election. GDP expanded at the fastest pace in over a year, albeit below market expectations. Services sector thrived, and a rebound in manufacturing activity shored up growth despite the looming presidential vote, currency volatility and tense North American Free Trade Agreement (NAFTA) renegotiations. Although official GDP data is still outstanding for the remaining economies in the region, Chile, Colombia and Peru are expected to improve. Due largely, to firmer commodity prices supporting mining sectors and vigorous consumer spending. The economic situation was gloomy in Argentina and Brazil in the second quarter, of 2018. Argentina, due to its large external imbalances, was particularly hard-hit by a sell-off of emerging-market assets. This led policymakers to turn to extraordinary measures and ultimately, an IMF deal in June to halt financial distress. Likewise, a crippling drought also weighed on activities in the same period, and Focus Economics panelists expected GDP to contract in second quarter. Similarly, economic growth was expected to be lackluster in Brazil in the second quarter. A nationwide truckers strike caused widespread disruption to economic activity in May and June, and less supportive global financing conditions also weighed on the country s momentum. On the political front, Brazil s upcoming October 2018 general election remain in the spotlight as clear candidates emerge. A reform-minded president with the capacity to build bridges across Brazil s fractured congress, is much needed to improve the economy s outlook. Peru has also seen political turbulence in recent weeks, due to a judicial scandal, which could undermine political stability. Leaked phone conversations of judges negotiating promotions and favors have rocked the judicial system and resulted in President Vizcarra firing the justice minister and the head of the Supreme Court, resigning in July. While 6

the government has promised a comprehensive reform of the judiciary in response, it remains to be seen whether this will be enough to extinguish public outrage. 3.0. African Economy Africa s economy expanded for the third consecutive quarter in, the second quarter, of 2018, as the region economy gained momentum after the growth slowdown in previous periods, driven by low commodity prices. Although, regional GDP was projected to expand 3.3 percent year-on-year in the second quarter, a supportive external environment boosted growth, as a result of higher commodity prices and healthy global demand. However, growth dynamics was far from uniform across economies in the region, as some countries still experienced sub-optimal economic performance in the period under review. Besides, major economic players in Nigerian and South African economies, performed below expectation in the second quarter, as growth remained weak in both economies. Easing inflation, improved foreign exchange rate liquidity and higher oil prices promoted economic activities in Nigeria. Manufacturing activity picked up in South Africa within the second quarter, while household consumption fell due to unemployment, and increased Value added Tax and a weak currency constrained growth. 3.1. South African Economy The South African Economy contracted by 0.7 percent in second quarter, 2018, being the second consecutive period of contraction, since the beginning of 2018. The South African GDP had contracted by 2.6 percent in the first quarter 2018. On a year-on-year basis, South African economy grew 0.4 percent in the second quarter, following a 0.8 percent growth in the first quarter. On a sectoral basis, most sectors of South African economy contracted except sectors like Mining and Quarrying that expanded by 4.9 percent up from -10.3 percent in quarter one; real estate and business services, 1.9 up from 1.1 percent in the preceding quarter; construction, 2.3 percent as against -1.9 percent in the previous quarter and utilities 2.1 percent. Meanwhile, agriculture, transportation, trade and manufacturing sectors contracted in the period under review by 4.9 percent as against 0.9 percent in first quarter; 1.9 percent as against 3.1 percent in the previous quarter and 0.3 percent as against 6.7 percent in first quarter respectively. Chart VI Presents Graphical Illustration of South Africa s Quarterly GDP Growth Rate. Chart VI: South Africa s GDP Growth Rate Source: Trading Economics 7

3.2. The Ghanaian Economy The Ghanaian economy remained on a downward trend in the second quarter, of 2018. The Purchasing Managers Index (PMI) dropped in June amid a fall in new orders growth, sustained inflationary pressures and weakened private consumption, characterised Ghanaian economy throughout the second quarter. In addition, sharp depreciation of the cedi against the U.S. dollar weighed on import demand in the second quarter, as consumers saw their purchasing power reduced, though domestic firms benefited from an increase in demand. Meanwhile, global prices for the country s top export commodities gold and cocoa, trended downwards, throughout the second quarter. 3.3. The Nigerian Economy In the second quarter of 2018, Nigeria s GDP grew by 1.50% (year-on-year) in real terms to N16.58trillion. Growth in second quarter 2018 was 0.79% points higher when compared to the second quarter of 2017 which recorded a growth of 0.72%, but 0.45% points slower than 1.95% recorded in the first quarter of 2018. On a quarter on quarter basis, real GDP growth was 2.94%. During the quarter under review, the 2018 appropriation bill was signed into law. As usual, the 2018 budget has a deficit of N1.950trillion, representing 1.74% of the country s gross domestic product. Budget deficit financing, has been a perennial problem to Nigerian economic managers because of negative consequences of financing method. Furthermore, aggregate GDP stood at N30.69trillion in nominal terms. This represented a 7.85% increase in nominal GDP, when compared to the preceding quarter (N28.46trillion) and 13.57% increase when compared to the corresponding quarter of 2017 (N27.03trillion). Chart VII Presents Nigeria s Quarterly GDP Growth Rate. Chart VII: Nigeria s Quaterly GDP Growth Rate Source: Trading Economics, Nigerian Bureau of Statistics 3.3.1. Foreign Direct and Portfolio Investment According to National Bureau of Statistics (NBS) report, the total amount of capital importation into Nigeria in the second quarter 2018 stood at $5.513 billion. This figure represented 207.62 percent decrease on year-on-year and 12.53 percent quarter-on-quarter. Capital importation is consisted of three components namely; Foreign Direct Investment (FDI); Foreign Portfolio Investment (FPI) and other investments. According to NBS report, portfolio and other investments, declined by 9.76 percent and 24.07 percent respectively. This accounted for the decline in total capital 8

importation into Nigeria, in the second quarter 2018. As usual, portfolio investment accounted for 74.7 percent ($4,119.5M) of total capital importation into Nigeria, in second quarter 2018. On quarter-on-quarter basis, portfolio investment declined from $4.565.09M in first quarter 2018 to $4,119.46M in second quarter representing 9.76 percent decline. Other investment inflow stood at $1.132M representing 20.5 percent of total capital imported into the country, in the second quarter. There has been a steady decline since fourth quarter, 2017- It dropped to $1.49 billion in first quarter and then further declined by 24.07 percent in second quarter 2018. Consistent with previous quarters, other investment inflow was dominated by loans ($1,121.66M) accounting for 99 percent of other investment inflow in the period under review. See further capital investment details presented graphically on chart VIII. Chart VIII: Capital Investment Capital Importation Composition Q2, 2018 Capital Importation Composition Q2, 2017 Other Investment, $1,132.75, 20% Foreign Direct Investment, $261.35, 5% Other Investment, $747.47, 42% Foreign Direct Investment, $274.37, 15% Portfolio Investment, $4,119.46, 75% Portfolio Investment, $770.51, 43% Second Quarter 2018 (in million $) Second Quarter 2017 (in million $) Source: National Bureau of Statistics NBS reported that in the second quarter of 2018, total FDI stood at $261.35M and represented 5.97 percent increase on quarter -on- quarter basis but 4.75 percent decline on year- on- year. On sectoral basis, equity investment (FDI and Portfolio investment) dominated the second quarter of 2018 reaching $4,091.55M, or 74.21 percent of the total capital importation in the period under review. Meanwhile, Federal Capital Territory (FCT), Abuja was the highest destination of capital imported into Nigeria, surpassing Lagos. Specifically, FCT attracted $2,547million in the second quarter of 2018. This represented 46.21 percent of the total capital importation into Nigeria in the period under review, followed by Lagos which received the second largest amount of capital inflow of $1267.6M or 30.08 percent of the total capital imported. Experts attributed the choice of Abuja and Lagos as capital importation destination to relative infrastructural development in these locations. Capital importation by country of origin showed that the United Kingdom maintained its top position as source of capital importation into Nigeria in second quarter of 2018. A total of $1,772.53M was imported from UK into Nigeria in second quarter, 2018. This figure represents 32.15 percent, but was a 21.2 percent decline from first quarter of 2018. The United States recorded $1,224.09M total capital importation into 9

Nigeria in the second quarter of 2018, which was also a 2.85 percent decline, from the amount received in the first quarter, of 2018. Capital importation by banks in second quarter of 2018, showed that the bank through which the highest share of capital flowed was Stanbic IBTC Bank. NBS report revealed that 54.9 percent of the total foreign capital inflow came through the bank. This was followed by Standard Chartered Bank, Citi Bank, Access Bank and Zenith Bank which accounted for 14.82 percent, 13.11 percent, 3.6 percent and 3.52 percent of the total capital importation in the second quarter of 2018 respectively. In sum, the six banks accounted for about 90 percent of capital importation source in second quarter. 3.3.2. Other Developments within the Financial Services Sector 3.3.2.1. Money Market The Naira remained stable against the United States dollar throughout the period under review, a position carried forward from the previous quarters. The naira remained stable at N360/$ in both the investors & exporters window and parallel markets, supported by robust foreign reserves that have sustained Central Bank of Nigeria (CBN); weekly intervention, amid the exit of foreign portfolio investments. Inflation in the second quarter sustained a decline that began in 2017 for the 18th consecutive months. The inflation report by NBS showed that inflation moderated from 11.23 percent year-on-year in June 2018. On month-on-month basis, the headline inflation decreased by 1.24 percent in June. It remained the first month-on-month decline since February 2018. Meanwhile, food inflation rose by 12.98 percent year-on-year in the second quarter 2018. This represented the tenth consecutive decline in year-on-year food inflation since September 2017. Experts attributed it to herders-farmers crisis and insurgency war in the North-East and Middle Belt of the country. In the second quarter of 2018, the nation s foreign reserves experienced mixed movements; periods when it improved, and others when it declined. External reserves at the end of June 2018, stood at $47630 million, from $47620million recorded in May 2018. Foreign reserve in Nigeria, peaked at $47360 in April 2018. The Monetary Policy Committee (MPC) during the quarter, left the benchmark interest rate unchanged, at 14%. The committee members retained Cash Reserve Requirement (CRR), at 22.5%; Liquidity Ratio (LR), at 30% and asymmetric corridor, at -200 + 500 basis points to avoid dislocating the fragile stability in the economy. During the quarter under review, crude oil prices broke through many record highs in the second quarter. In fact, it was one phenomenon that dominated the quarter and oil exporters would not forget in a hurry. The price of Nigerian premium crude, Bonny light went up to peak at $73/barrel compared with a yearto-date high of $80/barrel. NBS reported that, total loans granted by Nigerian banks to private sector declined from N16 trillion in the first quarter of 2017, to N15.34 trillion in the second quarter of 2018. This was the sixth consecutive quarter decline. According to the report, banks lent N15.6 trillion to the private sector in first quarter 2018, while the total value of credit allocated by banks stood at N15.34 trillion in the second quarter of 2018. This was the sixth consecutive quarter decline. According to the report, banks lent N15.6 trillion to the private sector in quarter one 2018, while the total value of credit allocated by banks stood at N15.34trillion as at second quarter 2018. On sectoral basis, oil and gas sector attracted a total credit allocation of N3.45trillion in second quarter as against N3.42trillion in first quarter 2018. Closely following oil and gas in credit allocation is the manufacturing sector that attracted N2.02 trillion, as against N2.07 trillion in first quarter 2018. Credit to Agricultural sector increased to N523.08 billion, from N501.6 billion recorded in first quarter. Aggregate total credit to power and energy sector dropped to N416.34 billion, up from N426.5 billion recorded in first quarter 2018. Credit to government increased to N1.47 trillion, while trade/general commerce decreased from N1.054trillion, to N1.044trillion. 10

3.3.2.2. Capital Market Global risk off sentiments amid uncertainty in the global financial markets, as well as uncertainty with regards to Nigeria s 2019 elections, caused a decrease in trading activity from the previous quarter in the Nigerian Stock Exchange (NSE). The value of transactions across all products on the NSE, totaled N359.33 billion in second quarter 2018, which represented an increase of 49.31% from second quarter 2017, although declining from first quarter 2017, total of N439.78 billion. In second quarter 2018, the average daily value traded across all products on the NSE, increased by 46.82% to N5.99 billion ($16.58 million), from N4.08 billion in the corresponding quarter of 2017; while the number of transactions recorded during the quarter decreased marginally, by 2.93%. The average daily volume traded also declined by 7.29% to 384.10 million units in Q2 2018, from 414.29million units in second quarter 2017. At the end of Q2 2018, the average PE ratio of The Exchange s listed equities stood at 21.83, compared to 21.07 in the previous year. The equity turnover velocity also increased by 1.96 percentage points to 10.35%, from 8.39% in second quarter 2017. The dividend yield for the 52-week period ending June 30, 2018 was 4.53%, compared to 5.11% for the previous year. Tables I and II indicate the top ten price gainers and losers respectively. Table I: Top Ten (10) Percentage Price Gainers as at 29th June, 2018 Source: NSE Weekly Report Quarter 2, 2018 Table I: Top Ten (10) Percentage Price Losers as at 29th June, 2018 Source: NSE Weekly Report Quarter 2, 2018 11

4.0. Sectoral Report 4.1. The Oil Sector In the second quarter of 2018, average daily oil production was recorded at 1.84million barrels per day (mbpd), lower than the daily average production of 1.87mbpd recorded in the same quarter of 2017 by 0.03mbpd and lower than the production volume of 2.0mbpd, seen in the first quarter of 2018. Details of oil production and oil real sector growth are presented in charts IX and X below. Chart IX: Nigeria s Oil Production (mbpd) Source: Trading Economics, National Bureau of Statistics Real growth of the oil sector was 3.95% (year-on-year), in Q2 2018 indicating a decrease by 7.48% points, relative to the rate recorded in the corresponding quarter of 2017. Growth also decreased by 18.72% points, when compared to Q1 2018. Quarter-on-Quarter, the oil sector recorded a growth rate of 8.34% in Q2 2018. The Oil sector contributed 8.55% to total real GDP in Q2 2018, down from figures recorded in the corresponding period of 2017 and the preceding quarter, where it contributed 9.04% and 9.61% respectively. Chart X: Nigeria s Oil Real Sector Quarterly Growth Source: Trading Economics, National Bureau of Statistics 12

4.2. Non-Oil Sector The non-oil sector grew by 2.05% in real terms, during the reviewed quarter. This represents 1.60% points increase, compared to the rate recorded for the same quarter in 2017, and 1.29% points over the first quarter of 2018. The non-oil sector was mainly driven by Information and communication services. Chart XI illustrate growth in Nigeria s non-oil real sector below. Chart XI: Nigeria s Non-Oil Real Sector Growth Source: National Bureau of Statistics 4.3. Manufacturing Real GDP growth in the manufacturing sector in the second quarter of 2018, was 0.68% (year on year), marginally higher than the same quarter of 2017, but lower than the preceding quarter by 0.04% points and 2.71% points respectively. Growth rate of manufacturing sector on a quarter-on-quarter basis stands at 3.51%. Real contribution to GDP in 2018 second quarter was 9.29%. Chart XII illustrate growth in Nigeria s manufacturing real sector. Source: National Bureau of Statistics 13

4.4. Agriculture The agricultural sector in the second quarter of 2018 grew by 1.19% (year-on-year) in real terms. This represented a decrease of 1.82% points from the corresponding period of 2017, also a decrease by -1.81% points from the preceding quarter. The sector in the current quarter contributed 22.86% to overall GDP in real terms, lower than the contribution in the second quarter of 2017 and higher than the first quarter of 2018 which stood at 22.93% and 21.65% respectively. Chart XIII illustrates the Agriculture Real Sector Growth. Chart XIII: Agricultural Real Sector Growth Source: National Bureau of Statistics 4.5. Information & Communication Technology Information and communication sector in the second quarter of 2018 recorded a growth rate of 11.81% in real terms, year on year. From the rate recorded in the corresponding period of 2017, there was an increase of 12.96% points. On Quarter on Quarter basis, the sector exhibited a growth of 13.02% in real terms. Of total real GDP, the sector contributed 13.63% in 2018 second quarter, higher than in the same quarter of the previous year in which it represented 12.37% yet higher than the preceding quarter, in which it represented 12.41%. Chart XIV illustrates the ICT Sector Growth. Chart XIV: ICT Sector Growth Source: National Bureau of Statistics 14

4.6. Quarterly Economic Indicators S/N Indicators Rates 1 MPR (%) 14.00 2 CRR (%) 22.5 3 Inflation Rate (%) as at June, 2018 11.23 4 External Reserve ($bn) 47.63 5 GDP (%) 1.50 6 Crude Oil (mbpd) 1.80 7 Exchange Rate (N/$) as at 30 th June, 2018 N305.75/US $1 8 Currency in Circulation (Ntrn) 1.901 Sources: National Bureau of Statistics: Capital Importation Report Q2, 2018; Nigerian Gross Domestic Product Report Q2, 2018; Central Bank of Nigeria quarterly report, 2018 5.0. Conclusion Careful review of global economy for second quarter of 2018, revealed mixed performance, amid political and economic uncertainties. While most economies witnessed upward swing, others pointed downward. The United States, China, Japan, Eurozone, United Kingdom, and Nigeria expanded at 4.1 percent, 1.8 percent, 0.5 percent, 0.4 percent and 1.5 percent respectively. While the Latin American countries economies dipped, due to brewing political turmoil in countries like Mexico, Brazil and Peru. In the Nigerian economy, the ripple effect of the delayed approval of the 2018 federal budget; the Nigerian- China currency swap agreement; the pre-election effect combined to shape the economy in the second quarter 2018. As with the first quarter of 2018, oil prices kept soaring in the international oil market, just as rising food prices persisted, reflecting the situation in the North- East and Middle belt, hitherto known as the food basket of Nigeria. Beginning from 2017 through to first quarter of 2018, the CBN maintained Monetary Policy Rate (MPR) at 14%; Cash Reserve Requirement (CRR) at 22.5% and Liquidity Ratio (LR) at 30%. The major challenge that constrained growth in the period reviewed, was the buildup in inflationary pressures, which resulted from rising food prices and high electricity and other energy costs. Other challenges remained the persistent poor state of infrastructure such as transportation, electricity and telecommunications. The fragile state of manufacturing compared to the rising demand for the imported goods, also impacted negatively on GDP growth. Worrisome was the low export capacity and difficulties of moving goods to the ports, because of gridlock at Apapa Wharf, the Nigeria premier port. The Economic outlook for the Nigerian economy remains shaky, even as the momentum gained in the second quarter of 2018 is expected to persist into third quarter, 2018. Although, the growth prospect looks promising, the US-China trade war may worsen Nigeria s non- oil exporters woes. Forecast from economic experts show that average tariffs on exports from Nigeria might not expand beyond 10% under the present situation. As a result, the affected businesses are likely to experience slow demand and delayed payment from China buyers. Losses suffered by non-oil exporters from product rejection, may adversely affect government revenue that may trigger economic lull. 15

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