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IMF projects 3.4% economic growth for Nigeria, as global growth forecast declines



Kristalina Georgieva

The International Monetary Fund has given Nigeria an upward review of its economic growth forecast for 2022, while expecting that the global output would decline due to the consequences of the crisis in Ukraine.

This was disclosed in IMF’s its April World Economic Outlook (WEO) report released as part of activities at the ongoing IMF/World Bank spring meeting in Washington.

The Washington based lender reduce the expected global output in 2022 to 3.6% in April down from 4.4% expected in January. These projections are worrisome since global output grew by 6.1% in 2021, a year hunted by the effects of the pandemic.

Nigeria, on the other hand, had an upward review of its economic growth projections. The International Monetary Fund (IMF) has projected the Nigerian economy to grow by 3.4% in 2022, up from 2.7% earlier projected.

What the IMF is saying

The IMF explained that the review was a result of the growing tensions in Europe. It said, “Compared to our January forecast, we have revised our projection for global growth downwards to 3.6 per cent in both 2022 and 2023. This reflects the direct impact of the war on Ukraine and sanctions on Russia, with both countries projected to experience steep contractions.”

This year’s growth outlook for the European Union has been revised downward by 1.1 percentage points due to the indirect effects of the war, making it the second-largest contributor to the overall downward revision.

The IMF added that “The war adds to the series of supply shocks that have struck the global economy in recent years. Like seismic waves, its effects will propagate far and wide—through commodity markets, trade, and financial linkages”

However, the IMF gave an upward review of Nigeria’s economic growth projection due to the benefits the country would derive from surging oil prices.

IMF said, “The medium-term outlook is revised downwards for all groups, except commodity exporters who benefit from the surge in energy and food prices.”

Also, the IMF upgraded its economic growth forecast for the Sub-Saharan African region to 3.8 per cent in 2022, representing a 0.1 percentage point increase from the 3.7 per cent forecast made in January.

“Higher food prices will hurt consumers’ purchasing power—particularly among low-income households—and weigh on domestic demand. Social and political turmoil, most notably in West Africa, also weigh on the outlook.

“The increase in oil prices has however lifted growth prospects for the region’s oil exporters, such as Nigeria. Overall, growth in sub-Saharan Africa is projected at 3.8 percent in 2022.″

What you should know

  • The emigration of about 5 million Ukrainians to neighbouring nations, particularly Poland, Romania, Moldova, and Hungary, adds to the region’s economic strains.
  • Russia is a key provider of oil, gas, and metals, as well as wheat and grain. Due to dwindling availability, many goods’ prices have skyrocketed.
  • The most affected commodity importers are those in Europe, the Caucasus and Central Asia, the Middle East and North Africa, and Sub-Saharan Africa. However, the rise in food and fuel prices would harm lower-income people around the world, notably in the Americas and Asia.
  • Nigeria may be able to reap the benefits of rising oil prices. The inability to satisfy OPEC oil quotes, on the other hand, is cause for alarm.
  • Nigeria’s crude oil earnings are down more than half from the $80 billion generated between 2011 and 2013 when oil prices were high.
  • According to Tony Elumelu, Nigeria loses approximately 95% of its oil production to thieves. According to Shell, the Bonny Terminal, which is intended to receive over 200,000 barrels of crude oil per day, only receives about 3,000 barrels per day, prompting the company to pull out of Nigeria.

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Business News

Ethereum Has Destroyed $8.10 Billion in Ether, ETH Scarcity to Increase After The Merge




According to current metrics, the Ethereum blockchain has burned 2.35 million ether since the implementation of Ethereum Improvement Proposal (EIP) 1559. The $8.10 billion in value was burned over the course of nine months and during the last seven days, 18,110 ether worth $34.9 million was destroyed.

Approximately 288 days ago, Ethereum developers implemented EIP 1559, a ruleset upgrade that basically changed the algorithm tied to the base fee per gas in the protocol and the network now burns the base fee per gas.

Since the August 5, 2021 London upgrade, after EIP 1559 was codified into the codebase and live, 2.35 million ether worth $8.10 billion in USD value has been destroyed forever.

The day after EIP 1559 was implemented, Ethereum co-founder Vitalik Buterin explained that the change was “definitely the most important part of [the] London [upgrade].”

During the last 24 hours, 2,396 ether worth $4.63 million has been burned. On May 1, 2022, the network saw the largest daily burn rate ever with 71,718 ether worth $138.78 million. The second highest burn rate daily record was on January 10, 2022, as 19,424 ethereum worth roughly $37.5 million was destroyed that day.

The biggest ethereum burner today is Opensea as the marketplace has burned 229,925 ether over 14,639,327 transactions. Gas used for ether transfers has burned a total of 207,072 ETH, and Uniswap V2 has burned 131,457 ether.

While the London upgrade’s EIP 1559 was a big protocol change, the next big shift will be when The Merge is applied. At that time, Ethereum will transition to a full proof-of-stake (PoS) network from its current proof-of-work (PoW) consensus algorithm.

Ethereum proponents are already getting prepared for The Merge as they suspect the change will be codified at some point this summer. Just recently, on May 17, the Ethereum-focused software firm Consensys launched an early access version of “Bonsai Tries” which aims to be a few steps ahead of the official Merge transition.

Furthermore, at the recent Permissionless conference, Ethereum developer Preston Van Loon said the public may see The Merge implemented by August. Ethereum developer Tim Beiko recently explained The Merge will likely go live by the third quarter of 2022. Beiko further explained that he “strongly suggests” that miners do not invest in more mining rigs going forward.

Despite the upcoming changes, Ethereum’s PoW hashrate has been at the highest point in the network’s lifetime on May 13, at block height 14,770,231. Burning ethereum has become simply part of the protocol and many crypto proponents believe ethereum will be ‘ultra-sound’ money with the deflationary mechanism.

A simulation of The Merge indicates that after the transition, ethereum will become scarcer. Currently, Ethereum’s issuance rate is 5.4 million ethereum a year, and after The Merge, the issuance rate will be around only 500,000 ether per year. While current supply growth is 3.7% annually, after The Merge, it will be roughly about 0.4% per year.

Amid all those changes, Ethereum’s burn rate will be the same, which is estimated to be around 900,000 ether per year. However, significant spikes like the 71,718 ether burned on May 1, can change estimations a great deal.

What do you think about the 2.35 million ether burned since August 5, 2021? How do you feel about The Merge approaching? Let us know what you think about this subject in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons



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Business News

MTN Nigeria now more valuable than all Nigerian Banks, Insurance Companies combined



MTN Share price e1559806857880

Nigeria’s telecommunication giant, MTN Nigeria is now worth N5 trillion making it more valuable than all banks, insurance companies, and the entire financial services companies listed on the Nigerian Stock Exchange combined.

This is according to market valuation data as of May 20th, 2022, tracked and compiled by Naijaonpoint from the Nigerian Exchange.

As of Friday, MTN Nigeria closed with a total market capitalization of N5.068 trillion making it the third most capitalized stock on the Nigerian Exchange. MTN Nigeria now joining Airtel and Dangote Cement, all members of the SWOOT to be worth more than the financial services sector.

MTN was briefly the most capitalized stock two weeks ago when the share price was trading at N264 per share valuing it at N5.3 trillion. However, Airtel and Dangote Cement prices have since risen while MTN shed some of its gains.

MTN Nigeria belongs to a category of companies termed SWOOTs by Naijaonpoint which means Stocks Worth Over One Trillion Naira. Other members of the group include Airtel Africa (N5.5 trillion) Dangote Cement (N5.1 trillion), BUA Cement (N2.5 trillion), Nestle (N1.1 trillion), and BUA Food (N1 trillion).

MTN now more Valuable than all Financial Services Companies

Shares of MTN have been on the rise since the beginning of the year starting from about N197 to as high as N270 last week.

  • The share spike which is also largely driven by MTN’s blistering 2021 FY results and 2022 first-quarter results took it past N5 trillion during the week joining Airtel and Dangote Cement as the only three stocks worth over N5 trillion in Nigeria.
  • The entire Nigerian Financial Services sector which includes banks, insurance companies, and other financial institutions is valued at a combined N4 trillion.
  • With an over N1 trillion gap between MTN’s valuation and that of Financial services companies, the telecom giant is now firmly more valued than all of them and will have to experience a 20% dip in share price to fall below.
  • MTN’s share price has risen 51.38% in the last year.

While Airtel, valued at over N5.5 trillion is also more valuable than all the financial services firms, MTN is more significant as the company’s financials represent income generated from Nigeria alone, excluding other African countries.

Airtel’s income includes that of other sub-Saharan African countries even though the income of Nigeria is dominant with about 40% of revenues.

MTN vs Banks

Why are telcos more valuable

A combination of factors explains why MTN and even Airtel are more valuable than the Nigerian financial services sector including banks.

  • While banks have been declaring impressive profits telcos have gone further by not just declaring profits but achieving double-digit growth projections for other sectors of their market, especially data.
  • With over 199 million active mobile subscribers, telcos have the customer base and demand that will continue to drive up revenues and profits in years to come.
  • Apart from data, Telcos also have the capacity and funding to veer into other sectors of the economy starting with banking. The recent MOMO license obtained by MTN opens up a new source of revenue for the organization.
  • Asides, from their growth prospects, telcos also have better control of their margins and returns. Unlike the financial services sector, Telcos deliver over 100% return on average equity of about 20%. MTN reported a return on average equity of 134% in 2021.
  • Apart from fundamentals, Nigerian banks also have billions in shares trading with much higher liquidity when compared to telcos.
  • This is due to the high proportion of single owners of the shares of the banks compared to telcos. For example, Zenith has about 643, 965 shareholders compared to MTN’s 10,931 as of the end of 2021. Also, whilst 2 shareholders own 15% of Zenith Bank, one shareholder owns 76% of MTN.

The shift in the size of Nigeria’s economy

We are also not surprised that MTN has now eclipsed the entire financial service sector in market valuation.

  • According to Nigeria’s GDP data, the telecommunications sector had a nominal GDP of N14.1 trillion as of December 2021 compared to N5.3 trillion for the entire financial services sector.
  • 10 years ago (2021), Telecommunication Sector has a nominal GDP of N5.3 trillion while banks had a GDP nominal size of N1.49 trillion.
  • This was not the case before the advent of Telcos.
  • Telcos are also now 12.6% of the country’s GDP.

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