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Understanding the Nigerian Economic Recovery and Growth Plan

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  • Understanding the Nigerian Economic Recovery and Growth Plan

The Federal Government on Wednesday formally launched the Nigerian Economic Recovery and Growth Plan (NERGP) to broaden its strategic objectives by restoring growth, build a globally competitive economy and accelerate inclusive growth by investing in the Nigerian people for the next three years, 2017-2020.

Here are the breakdown of the key aspects of the plan;

Economic Growth

The federal government targets Gross Domestic Product of 2.19 percent growth rate in 2017 but expected an expansion of 4.8 percent by 2018, while projecting that in 2019 the economy would moderate to 4.5 percent before hitting 7.0 percent growth rate in 2020.

However, while the 2017 economic growth rate is achievable considering current progress, the 4.8 percent forecast for 2018 seems a bit over-ambitious given the current headwinds — especially with the unstable nature of the country’s foreign revenue and the difficulties in generating enough to aid the economy to achieve 4.8 percent growth rate just after economic downturn, cast a doubt on that possibility. Also, the restricted 41 items would have to be reviewed and non-oil sector that has consistently contributed between 89-90 percent to the economy would have to be bolstered with the right monetary and fiscal policy to aid businesses.

Another issue is the proposed increase in the federal government’s revenues from N2.7 trillion to N4.7 trillion by 2020. According to the Minister of Budget and National Planning, Udo Udoma, there is need to up tax revenue from the current 6 percent it contributed to the economy to about 15 percent — which is about 150 percent increment.  This is counterproductive to the well-crafted plan as manufacturers and businesses would naturally pass on the difference to the consumers, therefore, further increasing the cost of goods, inflation rate, that the FG seek to reduce to a single digit by 2020 and impact productivity even more.

Oil Production

Accordingly, the federal government seeks to boost oil production from 1.4 million barrels per day (mbpd) in 2016 to 2.2 million bpd in 2017 and subsequently increase production to 2.5 mbpd in 2020. Whereas, OPEC monthly oil report released in March showed Nigeria’s oil production declined slightly in February from 1.533 million bpd recorded in January to 1.526 million. Making the nation the second-largest oil producer in Africa after Angola recorded 1.649 million bpd for the same month.

Therefore, for Nigeria to achieve 2.2 million bpd oil output in 2017 as projected in the NERGP, the country would have to start producing above 2.2 million pdp henceforth and up its oil rigs from the current 26 to about 34 recorded in 2014. Which is unlikely given global oil glut that has plunged both the oil prices and investments in new oil and natural gas projects.

This is likely to affect the proposed improve oil revenue and further damp other financial projections on the NERGP.

Overall, the NERGP remains the only broad economic plan in recent time. However, it failed to converge both the monetary and fiscal policy succinctly enough to address some salient issues that have been confronting lacklustre growth, low productivity, poor job creation and weak consumer spending. Rather, the emphasis was on high taxes in an economy that is looking to attract foreign investors and improve ease of doing business.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Markets

Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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