Data from the Nigerian Bureau of Statistics says Nigeria’s oil production reached a low of 1.84 million barrels per day (bpd), for the second quarter of 2018.
The report, released Monday, shows that this is the lowest the country has produced since it began its path to economic recovery in Q1 2017.
According to the report, which covers April to June 2018, the country’s economic growth in Gross Domestic Product (GDP) terms, slowed down from 1.9 per cent in the previous quarter to 1.5 per cent in the three months under review.
With crop production also falling to its lowest since 1987, according to NBS boss, Yemi Kale, analysts believe that the Central bank’s policy to reduce dependence on oil by increasing single digit interest rate loans to the agriculture and manufacturing sectors, might help boost revenue from non-petroleum aspects of the economy.
“Increased spending and the Central Bank’s move to lend money cheaper to large companies should support stronger growth in the second half of the year,” Feyisike Ilemore, an analyst at ARM Research, told Bloomberg.
At a banker’s committee meeting held last week Thursday, the CBN had agreed with the money deposit financial institutions to give seven-year loans at 9 per cent interest rate to farmers and manufacturers with new or existing projects.
Several analysts, however, feel that the CBN is trying to force interest rates down artificially. The monetary policy team of the apex bank has maintained the lending percentage between commercial –financial institutions at 14 per cent for two years now. This has kept lending interests to the economy in highs of 20 per cent. Michael Famoroti, an economist at Vetiva Capital Management Ltd, feels the rate is needed to curb any inflationary tendencies that might occur as a result of the increased CBN stimulus and 2019 election spending.
“Given the slowdown in agriculture and the spending boost expected, they are probably still quite concerned about inflation in the second half of the year,” Famoroti told Bloomberg.
The drag in the agriculture industry, is badly felt by stakeholders in the cocoa value chain.
Cocoa processors estimate the debt in the industry to be as high as N50 billion. According to them, poor power supply, bad roads and impatient banks have stalled the growth of the crop that once funded education in South-West Nigeria. Nigeria is the fourth largest exporter of the crop and the government has identified it as a strategic commodity. Yet, a harsh regulatory environment holds down the unlocked potentials of a fully developed cocoa value chain.
Petroleum contributes between nine and ten per cent of the country’s GDP, while Agriculture contributed 20 per cent in 2017. With the sector being a field that can take on more workforce than oil, the government will need to pay more attention to the implementation of its policies in the industry.