The Real Gross Domestic Product (GDP), according to the National Bureau of Statistics (NBS), contracted by 3.62 per cent in the third quarter of 2020 (Q3 2020), compared with 6.10 per cent in Q2 2020.
“The real GDP contraction in Q3 2020 was largely driven by the decline of 13.89 per cent in the oil sector from 6.63 per cent in Q2 2020. The non-oil sector also contracted by 2.51 per cent in Q3 2020, compared with 6.05 per cent in Q2 2020.”
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It further explained that the weak performance observed in both the oil and non-oil sectors was largely attributed to the lag effects of the lockdown, persisting weak global demand for crude oil and security challenges across the country.
The MPC also noted with concern the continuing sluggish recovery in the Manufacturing and Non-Manufacturing Purchasing Managers’ Indices (PMIs), which remained below the 50-index point benchmark in December 2020, at 49.6 and 45.7 index points, respectively, compared with 50.2 and 47.6 index points during the previous month.
This weak performance was attributed to the resurgence of the pandemic, foreign exchange pressures, increased costs of production, general increase in prices and decline in economic activities.
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Similar trend was also observed in the employment level index component of the manufacturing and non-manufacturing PMIs, which contracted for the ninth consecutive month in December 2020 to 46.3 and 45.1 index points, respectively, compared with 50.2 and 46.7 index points in the previous month.
The Committee, however, noted that current growth headwinds would likely moderate in the short to medium term, as the containment measures and the sustained implementation of economic stimulus permeate the domestic economy.
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The Committee expressed concerns on the persisting uptick in inflationary pressure for the sixteenth consecutive month, with headline year-on-year inflation moving further to 15.75 per cent in December 2020 from 14.89 per cent in November 2020.
This uptick was attributed to the increase in both the food and core components of inflation, which rose to 19.56 and 11.37 per cent in December 2020, respectively, from 18.30 and 11.01 per cent in November 2020.
This continued upsurge in food inflation was attributed to the logistical bottlenecks, spurred by the increasing security challenges in many parts of the country, which disrupted food production and supply to the market.
Other factors driving the core inflation, include the recent deregulation of the downstream sector of the oil industry, which led to hikes in the price of Premium Motor Spirit (PMS) and the upward adjustment in electricity tariff.
The Committee, however, noted that as output rebounds, supported by the suites of stimulus packages by both the Federal Government and the Central Bank, inflationary pressure would likely begin to moderate in the near term.
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