- Nigeria Faces ‘Lost Decade’ as Economic Growth Stagnates
Promises by Nigerian presidential candidates to fix an economy that vies with South Africa’s to be the continent’s largest could be unfulfilled unless the country is weaned off its oil dependence.
President Muhammadu Buhari, 76, a former military ruler running for a second four-year term in this week’s vote, has struggled to jump-start the economy and far from lifting growth to the annual 10 percent he promised before the previous election, gross domestic product contracted in 2016. His main rival is former Vice President Atiku Abubakar, a successful businessman who has been accused of corruption.
The winner of the Feb. 16 election will face the task of diversifying the economy of Africa’s top oil producer, easing stubbornly high inflation and improving the living conditions of a rapidly growing, young population struggling to find jobs.
Falling oil prices and output triggered the first economic contraction in 25 years in 2016. Africa’s top oil producer is heavily reliant on crude, with the fuel accounting for 90 percent of foreign-currency earnings and two-thirds of government income. Without reforms to reduce its oil addiction, Nigeria risks “a lost decade” of flat economic growth, according to a January report by the Brookings Institution.
“Whoever becomes president has to make sure that these non-oil sectors of the economy that are performing well also become globally competitive so that they make up a bigger share of the export basket,” said Phumelele Mbiyo, an economist with Standard Bank Group Ltd.
A spike in food prices and pre-election spending have stoked inflation. That caused the central bank to raise its benchmark rate to a record and keep it there despite earlier calls from government to help boost economic growth by loosening policy.
Although Nigeria’s public-debt levels are among the lowest worldwide at about 21 percent of gross domestic product, according to the CIA World Factbook, weak tax collection could compromise its ability to repay future obligations.
Rising debt levels along with tighter financing conditions have lifted Nigerian bond yields, crowding out credit to private businesses as banks have bought government debt instead of giving out loans, the International Monetary Fund said in March.
Authorities have tried to shift away from domestic government borrowing by issuing almost $10 billion in Eurobonds in the last two years. However, the government needs to diversify its economy to bolster revenue in order to unlock private credit and improve corporate performance, the IMF said.
A slow recovery with little job creation has hindered poverty-reduction efforts in Nigeria, which has the world’s highest number of people living in extreme hardship, according to a separate June report by the Brookings Institution.
Jobless growth has “heightened risks of social unrest or discontent” in Nigeria, the African Development Bank said in its 2018 outlook for the continent. The country has a population of almost 200 million people.
“Unemployment will remain an issue even when the economy begins to boom, simply because of the rapid rate of population growth,” which exceeds GDP expansion, said Michael Famoroti, an economist with Lagos-based consultancy, Stears Business.
Nigeria, which the IMF expects to be the world’s third most-populous country by 2050, needs “faster growth to improve per-capita incomes and significantly reduce high unemployment and poverty,” the lender said.
In a bid to attract foreign investment, Abubakar pledged to scrap a system of multiple exchange rates introduced under Buhari, a setup which the IMF said creates distortions in the economy. But central bank Governor Godwin Emefiele, whom Abubakar says he would replace, believes a naira free float would cause capital flight.
In search Of Alternative Power Supply, Nigerians Spend N7T On Power Generation Annually
Nigerians, and by extension, their businesses, expend about N7 trillion annually on power generation, the Executive Director and Chief Operating Officer, Off-Grid Tech Solutions Ltd, Stephen Ogboko has said.
Ogboko, who made this known at a virtual news conference in Lagos said that inadequate power supply had been a major challenge facing businesses in the country, forcing them to source alternative power supply for their operations.
“Nigeria is among the countries with a very high need of electricity.
“A significant amount of the economy is powered largely by small-scale generators and almost 50 percent of the population have limited or no access to the grid.
“This could be effectively tackled with the deployment of off-grid renewable energy solutions by making electricity more cost effective and environmentally friendly,” Ogboko said.
He described renewable energy from off-grid resources as sustainable and cost-effective for farmers and Small and Medium Enterprises (SMEs).
Ogboko said Off-Grid Tech Solutions Ltd. partners with the global innovators of off-grid solutions to provide reliability.
“This is cost-effective and lasting solutions to societal problems toward improving the lives of people in developing nations.
“Our team of experts have worked all over Africa, and continue to work to provide solutions to a variety of sectors.
“We have marketed and delivered smart off-grid solutions for many years, providing permanent, efficient, safe and affordable solutions,” He said.
Ogboko said that the firm specialises in the marketing of heat lamps and incubators, gas-powered air conditioners and cooling fridge, mobile power solution-solar energy box, pressure cookers, among others.
He said that notable partners of the initiative were the Federal Ministry of Agriculture and Rural Development (FMARD), United Kingdom Department for International Trade (UK-DIT), International Institute of Tropical Agriculture (IITA), All Farmers Association of Nigeria (AFAN), Buckler Group, and Tywit.
The News Agency of Nigeria (NAN) reports that off-grid renewable energy solutions support the expanding access to modern energy services in an environmentally sustainable manner.
Off-grid renewable will deliver a wide spectrum of electricity services for households, public services, and also serve commercial and industrial purposes.
Off-grid energy solutions are one of the key drivers of the nation’s push for industrialisation.
Goldman Sachs Revised Down Brent Oil Forecast for Q3 2021
Goldman Sachs Group, an American multinational investment bank and financial services company, has revised down its Brent oil price projection for the third quarter (Q3) of 2021 by $5 from $80 per barrel previously predicted to $75 a barrel following the surge in Delta variant COVID-19.
The investment bank predicted that the surge in Delta variant COVID-19 cases will weigh on Brent oil price in Q3 2021 even with the expected increase in demand.
However, the bank projected a stronger second half of 2021, saying OPEC+ adopted slower production ramp-up will offset 1 million barrel per day demand hit from Delta.
Goldman said, “Our oil balances are slightly tighter in 2H21 than previously, with an assumed two-month 1 mb/d demand hit from Delta more than offset by OPEC+ slower production ramp-up.”
The leading investment banks now projected a deficit of 1.5 million barrels per day in the third quarter, down from 1.9 million barrels per day previously predicted.
Therefore, Brent crude oil is expected to average $80 per barrel in the fourth quarter, a $5 increase from the $75 initially predicted and the bank sees 1.7 million barrels per day in the fourth quarter.
“The oil market repricing to a higher equilibrium is far from over, with the bullish impulse shifting from the demand to the supply side,” the bank said.
Goldman added that even if vaccinations fail to curb hospitalisation rates, which could drive a longer slump to demand, the decline would be offset by lower OPEC+ and U.S. shale output given current prices.
“Oil prices may continue to gyrate wildly in the coming weeks, given the uncertainties around Delta variant and the slow velocity of supply developments relative to the recent demand gains,” it said.
Oil Extends Gains on Thursday on Expectations of Tighter Supplies
Oil prices rose about $1.50 a barrel on Thursday, extending gains made in the previous three sessions on expectations of tighter supplies through 2021 as economies recover from the coronavirus crisis.
Brent crude settled at $73.79 a barrel, up $1.56, or 2.2%, while U.S. West Texas Intermediate (WTI) settled at $71.91 a barrel, rising $1.61, or 2.3%.
“The death of demand was greatly exaggerated,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “Demand is not going away, so we’re back looking at a very tight market.”
Members of the Organization of the Petroleum Exporting Countries and other producers including Russia, collectively known as OPEC+, agreed this week on a deal to boost oil supply by 400,000 barrels per day from August to December to cool prices and meet growing demand.
But as demand was still set to outstrip supply in the second half of the year, Morgan Stanley forecast that global benchmark Brent will trade in the mid to high-$70s per barrel for the remainder of 2021.
“In the end, the global GDP (gross domestic product) recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 and we expect OPEC to remain cohesive,” it said.
Russia may start the process of banning gasoline exports next week if fuel prices on domestic exchanges stay at current levels, Energy Minister Nikolai Shulginov said, further signalling tighter oil supplies ahead.
Crude inventories in the United States, the world’s top oil consumer, rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, U.S. Energy Information Administration data showed.
Inventories at the Cushing, Oklahoma crude storage hub and delivery point for WTI, however, has plunged for six continuous weeks, and hit their lowest since January 2020 last week.
“Supplies fell further by 1.3 million barrels to the lowest level since early last year, theoretically offering support to the WTI curve,” said Jim Ritterbusch of Ritterbusch and Associates.
Gasoline and diesel demand, according to EIA figures, also jumped last week.
Barclays analysts also expected a faster-than-expected draw in global oil inventories to pre-pandemic levels, prompting the bank to raise its 2021 oil price forecast by $3 to $5 to average $69 a barrel.
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