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Jagged Reopening of Nations Worldwide Paves Uncertain Path to Economic Recovery

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Economy

As economies reopen globally, there is a constant battle to achieve a balance between surging COVID-19 cases and addressing economic slowdown.

Due to the prevailing uncertainty following COVID-19, Global Data’s 2020 forecast for global economic growth has been revised downward from -0.9% (estimated 6 April) to -3.95% (estimated 3 August).

The signs of a faltering rebound is evident in countries such as the US, which may act as a drag on the European economy. GlobalData expects the global economy to witness a contraction of real GDP by 3.95% in 2020 accompanied with a growth of 5.27% in 2021, which is subject to change in the event of a second wave of COVID-19 spread amid resurgence of cases in major economies.

Shruti Upadhyay, Economic Research Analyst at GlobalData, states: “As businesses have been allowed to reopen and retail sales improved, an uptick was observed in the manufacturing and service sectors in the last three months (May–July) globally. GlobalData noted that manufacturing PMI showed an overall improvement in June for countries such as the US (49.8), Brazil (51.6), India (47.2), Russia (49.4), the UK (50.1), France (52.3) and China (50.9). Historically, when the index surpasses 50, it gestures an end to a manufacturing recession. However, with regional lockdowns gaining traction due to resurgence of cases, business conditions now continue to witness patchy recovery.

Retail sales in the Eurozone plunged to record lows when confinement measures were put in place, but sales rebounded as economies started reopening in a phased manner. Asymmetric demand led to rise in retail sector activities and a fall in demand for contact-intensive sectors. Countries that are cripplingly reliant on contact-intensive industries are expected to be deeply impacted in short-term. A slow recovery is being noticed in the active jobs and stock market, both in advanced and emerging economies with varying severity of fresh outbreaks and different pace of openings in the economy.

Upadhyay concludes: “The Eurozone’s reopening provides a beacon of light to countries such as the US, India and Brazil which are battling with rising number of cases in the country. However, with draconian lockdown measures lifted to reignite the damaged economies, the number of virus cases crept higher in Spain, France and Germany as these nations grapple between saving the economy and averting fresh outbreaks.

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.

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Economy

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

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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.

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Economy

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

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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.

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Economy

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

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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.

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