Tuesday, June 07, 2016 1:34PM /FSDH
The prices of government bonds depreciated in more countries in May 2016 than they appreciated. The 17% April 2022 Egypt Government Bond recorded the highest month-on-month price decrease of 10.70% to 106.26. The Nigeria Government Bond followed the Egypt Government Bond with a decrease of 4.30% to 110.52.
The 12.71% June 2022 Kenya Government Bond recorded the only month-on-month price increase of 0.44% to 95.53. The Argentina Bond and Nigeria Bond closed the month at negative real yields. Other bonds we monitored closed the month at positive real yields. The Kenya Government Bond still offers the most attractive real yield amongst the selected bonds in May 2016.
According to the United States (U.S.) Bureau of Economic Analysis, the U.S. economy grew by 0.8% (year-on-year) in Q1 2016, higher than the 0.5% increase initially estimated. Consumption expenditure continued to boost growth as spending on home building increased more than expected and the drag from net trade and inventories were smaller. In contrast, business investment fell faster than anticipated.
Meanwhile, the Chinese economy grew by 1.1% (quarter-on-quarter) in Q1 2016, lower than the 1.5% recorded in Q4 2015. China’s trade surplus also increased to US$45.56bn in April 2016, from US$34.13bn recorded in April 2015. It is the largest trade surplus since February 2016 as exports and imports fell more than expected. Similarly, inflation rate in China stood at 2.3% in April 2016, same as in the previous month.
The Global GDP
The Organization of the Petroleum Exporting Countries (OPEC) noted that the global economy is recording improved momentum. The OPEC Oil Market Report for May 2016 maintained the 2016 global growth forecast at 3.1%, unchanged from previous assessment.
The report stated that in the Organization for Economic Cooperation and Development (OECD), only the U.S. posted very low Q1 2016 growth. The Euro-zone growth forecast showed a trend to the upside and Japan seemed to weaken again. These counter-balancing effects kept OECD growth unchanged at 1.9% for 2016. India and China continue to expand at a considerable rate.
OPEC added that many country-specific economic challenges remain and geopolitical issues and their potential to spill over into the real economy still remain. The upside potential for the current global GDP growth forecast could come from the U.S., India and the Euro-zone. Also, central bank policies will continue to constitute an influential factor amid lower global inflation.
Domestic Real GDP
In Q1 2016, the Nigerian economy suffered from energy shortages and price hikes, scarcity of foreign exchange and depressed consumer demand, amongst others. The Nigerian economy contracted by 0.36% (year-on-year) in Q1 2016, compared with the growth of 3.96% in the corresponding period of 2015 and 2.11% in Q4 2015.
Quarter-on-quarter (Q-o-Q), the GDP contracted by 13.71% in Q1 2016. The oil sector recorded a decline of 1.89%, compared with the decline of 8.15% recorded in Q1 2015. Q-o-Q, the oil sector increased by 10.27%. The oil sector contributed approximately 10.29% to the real GDP in Q1 2016, higher than the 7.95% contribution in Q4 2015.
The non-oil sector recorded a contraction of 0.18% in Q1 2016, compared with the 5.59% and 3.14% recorded in Q1 2015 and Q4 2015, respectively. The contraction in the GDP in Q1 2016 was because of the decline in the activities recorded in the Manufacturing, Financial Institutions, and Real Estate sub-sectors. However, there was growth in Crop Production, Trade and, Telecommunications and Information Services sub-sectors.
The nominal GDP stood at N22.26trn in Q1 2016. This represents an increase of 5.80% from N21.04trn recorded in Q1 2015, but lower by 14.15% from N25.93trn recorded in Q4 2015. In Q1 2016, the services sector contributed 55.20% to the GDP, followed by industries at 24.33% and agriculture at 20.48%.
According to the National Bureau of Statistics (NBS), the unemployment rate in Nigeria stood at 12.1% as at Q1 2016 from 10.4% and 9.9% in Q4 2015 and Q3 2015 respectively. The underemployment rate increased to 19.1% (15.02mn) in Q1 2016, from 18.7% (14.4mn) and 18.3% (13.2mn) in Q4 and Q3 2015.
The NBS noted that there were a total of 24.50mn people between ages 15‐64 who were either unemployed or underemployed in the labour force in Q1 2016. The figure stood at 22.45mn and 20.73mn in Q4 2015 and Q3 2015 respectively.
The report showed that the economically active population or working age population (persons within ages 15‐64) increased from 105.02million in Q4 2015 to 106million in Q1 2016. In Q1 2016, the labour force population (i.e those within the working age population willing, able and actively looking for work) increased to 78.4million from 76.9 million in Q4 2015, representing an increase in the labour force by 1.99%. This means 1.52mn economically active persons within ages 15‐64 entered the labour force in Q1 2016. Within the same period, the total number of people in full employment (who did any type of work for at least 40hours) decreased by 0.97%.
The NBS is of the view that, with an economically active or working age population of 106mn and labour forces population of 78.4mn. This means 27.6mn persons within the economically active or working age population decided not to work for various reasons in Q1 2016, compared with 28.06mn in Q4 2015.
The latest foreign trade statistics released by the National Bureau of Statistics (NBS) shows that the Nigerian economy achieved a trade deficit of N184bn in its merchandise trade in Q1 2016.
The imports dominated the total trade in Q1 2016. In Q1 2016, Nigeria’s total trade stood at N2.72trn, a decrease of 22.73% from N3.52trn recorded in Q4 2015. This was because of the sharp fall in the value of both imports and exports. Exports recoded the highest decline of 34.54% to N1.27trn in Q1 2016, from N1.94trn in Q4 2015.
On the average, exports accounted for about 63.34% of the total trade in the last thirteen quarters. The highest contribution of exports to total trade was 72.10% in Q3 2014, while the lowest contribution was 46.60% in Q1 2016.
On a quarterly basis, the contribution of exports to total merchandise trade decreased to 46.60% in Q1 2016 from 55.20% in Q4 2015. Meanwhile, in the last thirteen quarters between Q1 2013 and Q1 2016, oil exports dominated the total merchandise trade at an average of 75.18%.
The top destination for Nigeria’s exports showed that India remained the preferred spot, followed by the United States, Spain, Netherlands, France and South Africa. On the other hand, China remained Nigeria’s number one import partner, followed by the United States and Belgium.
Top on the list of the imported goods in Q1 2016 are: Boilers, Machinery and Appliances Thereof; Mineral Products; Products of the Chemical and Allied Industries; Vehicles, Aircrafts and Products Thereof; and Base Metals and Articles Thereof.
The top on the list of the imported goods in the sub-categories in Q1 2015 are: Motor Spirit (ordinary); Durum Wheat; Imported motorcycles and cycles; Cane Sugar; Mixtures of Odoriferous Substances; Other Machine Tools for Working Stone, Ceramic and concrete; and Milk and Cream in powder. The leading export commodities are: Mineral Products (83%); Vehicles, Aircraft and Parts Thereof (5.7%); and Prepared Foodstuffs, Beverages, Spirits and Vinegar, Tobacco (5%).
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