Connect with us

Economy

Coronavirus: Economic Implications as Nigeria Battles First Case

Published

on

coronavirus
  • Coronavirus: Economic Implications as Nigeria Battles First Case

Nigeria, Africa’s largest economy, on Thursday reports the very first case of Coronavirus despite the Federal Government disbursing N386 million to health agencies a week ago to prevent and monitor tourists arriving in one of the world’s most populous and limited nations.

The Nigerian Stock Exchanged (NSE) responded as expected, closed in the red, and on Friday opened lower as investors look to decipher the extent of damage done or could be done giving how limited Nigeria’s health system is.

The International Monetary Fund (IMF) had lowered the nation’s growth projection for the year from 2.1 percent previously predicted to 2 percent a week ago, citing slow recovery, falling foreign reserves and declining global oil prices.

Since the report, Brent crude, against which Nigerian oil is measured, has dropped from $57 a barrel to $49.56 on Friday after many countries like Nigeria, Lithuania, Wale, etc reported their very first case of infection.

UKOilDaily 2At $49.56 per barrel, Nigeria’s earning per barrel is $7.44 below the $57 a barrel benchmarked by the Federal Government for the 2020 budget. However, at an assumed production level of 2.18 million barrels per day, the nation would be losing $16,219,200 per day.

But with coronavirus fast-spreading outside China, the world’s economy is predicted to slow down with China, the world’s largest importer of crude oil, expected to suffer the most.

This means Nigeria’s foreign reserves could plunge further from the current level of $36 billion as the Central Bank of Nigeria struggles to ensure availability of dollar for importers amid projected rise in capital flight as reports of coronavirus crystalizes.

Foreign investors are likely to abandon Nigerian assets and suspend new investment plans in the near-term, leaving the nation without capital importation to complement the little from crude oil sales. Therefore, Nigeria may struggle to fund the 2020 budget and meet other financial obligations as access to the US dollar dropped with the rising cases of coronavirus outside China.

According to a recent OPEC report, Nigeria’s crude oil production dropped to 1.57 million barrels per day in December, suggesting that the nation has not pumped near the assumed 2.18 mbpd in 2020 as available reports are pointing to a nation struggling to up production despite OPEC capping its production quota at 1.75 mbpd and expecting to fund 31.35 percent of its N10.59 trillion budget with oil revenue.

Also, rising consumer prices is another issue that could hurt consumer spending in 2020. President Muhammadu Buhari had closed the nation’s border in August 2019 to force decorum across the land borders without ensuring local manufacturers can service the 200 million nation of pure consumers. This has led to the continuous rise in inflation rate to 12.13 percent in January, the highest in 21 months, and expected to even rise further if the Open Market Operations (OMO) policy of the Central Bank of Nigeria is not reversed.

This, combined with the new Finance Act mandating Nigerians to pay 7.5 percent Value Added Tax (VAT) amid weak wage growth and poor consumer buying power could worsen the nation’s job creation and unemployment in 2020. Nigeria’s unemployment presently stood at 23.1 percent or 20.9 million people with youths unemployment/underemployment at 55.4 percent, the nation faces not just coronavirus in 2020 but weak growth, rising unemployment rate, low new investment and rising consumer prices as neighbouring countries would no longer welcome the idea of an open border with a coronavirus infected nation.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading
Comments

Economy

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

Published

on

Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

Continue Reading

Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

Published

on

Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

Continue Reading

Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

Published

on

Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending