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Analysts Proffer Measures to Enhance Economic Growth

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  • Analysts Proffer Measures to Enhance Economic Growth

Following a World Bank report that revealed economic growth in Nigeria has not been impressive since 1995, some economic analysts have advised the federal government to enhance investment in infrastructure and also develop policies that would encourage foreign direct investments (FDIs).

The World Bank had in the latest edition of its Africa’s Pulse stated that Nigeria’s economic growth has remained below population growth in the fourth consecutive year, adding that although regional growth was expected to rebound to 2.8 per cent in 2019, it has remained below three per cent since 2015.

However, reacting to the position of the multilateral institution, an analyst at Ecobank, Mr. Kunle Ezun, stressed the need for increased government spending.

He said: “This report wouldn’t come to me as a surprise looking at the economy in the last few years. We had slipped into recession and by 2017, we recovered slightly to grow at 0.8 per cent Gross Domestic Product (GDP) and by 2018, we grew by 1.93 per cent.

“So if you put that side by side with the size of the economy, and the population growth, you can completely say growth is slow and may not be adequate to support the economy.

“The economy on its own has a population growth of two per cent annually and if you have a growth of less than two per cent, then you would begin to see the gap and the threats to the economy.

“So if the World Bank has said is a slow-growing economy, it is accurate because the data are in line with that argument. This would continue to widen the gap between the rich and the poor and this gap might be the fertile ground for social unrest and for insecurity.”

Speaking on measures to boost economic growth, he said: “There is need for government to rejig the economy. This can start from the 2019 budget. I think the amount in the 2019 budget is low for our economy.

“The government needs to see how much of funds you can push into the system to stimulate the output and growth.”

Ezun added: “The federal government is a big spender in a growing economy like ours. So the government could spend like 60 per cent while the private sector would do about 30 per cent or more.

“So if they can fast track the approval of the minimum wage and all other reforms that would improve liquidity in the system and empower the citizenry to spend more, then we would be on the right path.

“That is because the citizenry is empowered to spend more, it stimulates local production and creates demand and when those two work together, you begin to see an improvement in the economy.”

On his part, an economist and Senior Lecturer at the Lagos Business School, Dr Bongo Adi, called for a different approach to monetary policy in the country.

He said: “We have to look at the implications of tight monetary policy which includes the tightening of liquidity, which reduces credit to the private sector.

“So if you back 10 years from 2008, aggregate monetary policy has been tight and when you look at our growth, you see that Nigeria has underperformed compared with sub-Saharan and middle-income countries in Africa and our growth rate has declined significantly.

“The slow growth is simply because of the way monetary policies have been managed.”

Speaking on measures the government should adopt to enhance growth, Adi said: “The truth is that we need to use monetary policy instruments to grow the economy and for that to happen, we should be approaching single-digit rates to enhance growth.”

To the Managing Director, Afrinvest Securities Limited, Mr Ayodeji Ebo, a major catalyst for growth is creating policies to secure foreign investments.

He explained: “What needs to be done is that there needs to be a more political will to implement a lot of the policies that are already available on investments. For this economy to grow, we need more partnership with private investments.

“Why people are not investing is because of the way by which the government can easily resign a transaction where investors would have put in a lot of money. so if we can rejig our policies to attract and ensure that once a contract is signed, no new government can come to override that first contract, then we can begin to attract more investments into critical areas that would jumpstart the economy.

“I think the federal government should come up with deliberate policies that would attract foreign direct investment, reduce the burden on the government and if we are able to that, I feel that this economy can grow at the rate of six to seven per cent if those policies are put in place.”

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.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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