What Nigeria and Other Emerging Economies Should Expect From Joe Biden’s Presidency
As Joseph Robinette Biden Jr., the former Vice President and President-elect of the United States of America, prepares to take over the world’s largest economy from President Trump on January 20, 2021, Investors King looks into what Nigeria and other emerging economies should expect following four years of unnecessary China-US trade war, US-Iran attacks, US-North Korea nuclear war declaration and back and forth with Russia on US election meddling.
Since Donald Trump became the President of the United States on January 20, 2016, he has worked hard to up global risk, increase economic uncertainties and ensure global economy does not expand through China trade war and the disapproval of a deal that took six world powers 12 years to sign with Iran. Like those were not enough, Donald Trump immediately started threatening a fellow psycho, Kim Jong-un of North Korea, with a bigger nuclear button, creating an intense and extremely challenging business environment in recent times.
The record-increase in global economic uncertainties and risks led to capital outflow from emerging economies as investors became wary of impending doom that could erode their capital, especially knowing that emerging economies do not have the structure to protect investment funds once catastrophe struck.
In the first quarter of 2017, just about a year in the office, Nigeria’s Foreign Direct Investment (FDI) plunged by $640.61 million or 41.36 percent from $1.55 billion posted in the final quarter of 2016. This decline continues throughout the year despite the Central Bank of Nigeria introducing Investors and Exporters Forex Window to bridge the gap between exchange rates offered by the apex bank, bureau de change operators and on the black market.
According to a United Nations report, Nigeria’s FDI declined by 43 percent in 2018 to $2 billion, partly because of MTN tax issues with the Federal Government and Trump’s ‘shithole’ comment that demarketed Nigerian assets and discouraged potential investors from looking the Nigerian way in the same year that foreign investment inflow into sub-Saharan Africa rose by 13 percent to $32 billion.
Donald Trump’s poor attitude towards Africa was the main reason African nations increased their Chinese loans and other financial supports that has now distanced the continent from the world’s largest economy. One of the jobs of Joe Biden would be to prove the United States’ commitment to the continent or watch American position in Africa further relegated.
Likely Implications of Joe Biden Presidency on Nigeria and Emerging Nations
As widely expected, Joe Biden’s calm personality and diplomatic nature could help bridge the division created in the upper house — control by the Republicans — and unite US lawmakers for one specific purpose, national building.
Investors King is anticipating that this unity, coupled with the fact that Democrats control the lower house would help speed up the approval of almost $2 trillion stimulus package as the world’s largest economy looks to revive businesses battered by COVID-19 and protect jobs while simultaneously creating new ones.
On the global front, Joe Biden would likely seek an amicable trade agreement with the second-largest economy, China and look to ease global tension and support the International Monetary Fund, the World Bank, United Nations and other global organisations on growth and at curbing or securing COVID-19 cure.
With global tension and uncertainties predicted to subside with the exit of Donald Trump, global investors will start looking into emerging markets with the ability to grow over two percent and with lesser risk. And not just focus on the United States as a safe haven to protect their funds.
Charles Robertson, a Chief Economist at Renaissance Capital (RenCap), said Blackrock’s fixed income section that manages over $2.6 trillion in assets have said they will invest more in emerging economies. To put this in perspective, Africa’s total GDP is $2 trillion, therefore, Blackrock alone could be dumping over $100 billion in fixed income on the continent next year.
Robertson said “The stock of Africa’s Eurobonds only topped $100 billion in 2018, and even if it is only Blackrock’s actively managed part of the business more like $2 trillion in all asset classes (perhaps $700 billion in fixed income), that starts to shift to Emerging Markets this could be very helpful.
“Our base case is that Foreign Direct Investment will stop being a net positive for the US due to Trump’s defeat, and portfolio flows will also go to EM, and together, these will drive the $ gradually weaker in coming years,” he said.
For Nigeria, this will means more forex inflow to augment weak foreign revenue generation amid low oil prices and weak global demand. This will further expand Nigeria’s economic productivity given its import-dependent nature and lack of alternative foreign revenue generation.
Prepaid Meter is Free, Buhari Warns DisCos, Agents
President Muhammadu Buhari once again warned Power Distributing Companies (DisCos) and their agents selling prepaid meters to electricity customers against the Federal Government directive that meter is free.
Ahmed Rufai Zakar, the Special Adviser to the President on Infrastructure, who represented Buhari at the FGN/NLC-TUC ad-hoc committee on electricity tariff stakeholders held in Ibadan, Oyo State on Wednesday, said President Buhari understood people’s concerns on issues surrounding electricity and was determined to curb and deal with unscrupulous individuals in the power sector.
He said, “We have made it very clear through the regulators direct order as well as intervention from the Ministry of Power that the meters are to be provided to Nigerians at no cost.
“Even for meters that were paid for, there is the directive from the regulator to the discos that they would need to find a way to reimburse those citizens over time.
“In cases where we find any disco or disco representative selling the meters or exploiting Nigerians to be able to get meters by paying, we would take the full measures of the law.
“The President has mandated that these meters must be free. We have also said that they must come from local manufacturers.
“This would create jobs and revive our industry.”
Nigeria’s Real Estate Sector Shrinks by 8.06% in the Third Quarter -NBS
Economic uncertainty plunged Nigeria’s real estate sector by 8.06 percent in the third quarter of the year, according to the National Bureau of Statistics (NBS).
Nigeria’s statistics office said “In nominal terms, real estate services recorded a growth rate of –8.06 per cent in the third quarter of 2020, indicating a decline of –11.78 per cent points compared to the growth rate at the same period in 2019, and by 9.12 per cent points when compared to the preceding quarter.
“Quarter-on-quarter, the sector growth rate was 18.92 per cent.
“Real GDP growth recorded in the sector in Q3 2020 stood at -13.40 per cent, lower than the growth recorded in third quarter of 2019 by –11.09 per cent points, but higher relative to Q2 2020 by 8.59 per cent points.
“Quarter-on-quarter, the sector grew by 17.15 per cent in the third quarter of 2020.
“It contributed 5.58 per cent to real GDP in Q3, 2020, lower than the 6.21 per cent it recorded in the corresponding quarter of 2019.”
Nigeria’s economy contracted by 2.48 percent in the first nine months following a 6.10 percent and 3.62 percent contraction in the second and third quarters respectively.
Nigeria Requires N400 Billion Annually to Maintain Federal Roads -Senator Bassey
The Chairman of the Senate Committee on road maintenance, Senator Gersome Bassey, on Friday said Nigeria requires about N400 billion annually to maintain federal roads across the country.
The Senator, therefore, described the N38 billion budgeted for road repairs in the 2021 proposed Budget as grossly inadequate. According to him, nothing meaningful could be achieved by the Federal Roads Maintenance Agency (FERMA) with such an amount.
He said, “For the 35 kilometres federal roads in the country to be motorable at all times, the sum of N400bn is required on yearly basis for maintenance.”
Bassey “What the committee submitted to the Appropriation Committee in the 2021 fiscal year is the N38bn proposed for it by the executive which cannot cover up to one quarter of the entire length of deplorable roads in the country.
“Unfortunately, despite having the power of appropriation, we cannot as a committee jerk up the sum since we are not in a position to carry out the estimation of work to be done on each of the specific portion of the road.
“Doing that without proposals to that effect from the executive, may lead to project insertion or padding as often alleged in the media.”
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