Connect with us

Economy

Africa Displays Pockets of Positivity Amidst Covid-19 Fallout

Published

on

The latest NielsenIQ Africa Prospects Indicator (APi) report Recalibrating for an Unprecedented Future which looks at the prospects of key countries across Sub-Saharan Africa (SSA) has revealed that despite the unprecedented times in which we live, there are pockets of positivity to drive businesses through the COVID-19 storm.

Commenting on the results of the tenth edition of the APi NielsenIQ Global Intelligence Unit Executive Director Ailsa Wingfield says; “As countries deal with second and third waves and virus mutations, the evidence of significant economic, employment and social effects are manifesting in permanent, changed consumer behaviour as lingering pandemic effects have shaped adjusted circumstances, attitudes and needs  that will persist in 2021.”

Top country prospects

To understand the broader context of this phenomenon, the APi ranks the top country prospects in SSA based on combined economic, business, consumer and retail indicators. Kenya has achieved top spot in the latest report amidst the 2020 pandemic period, with its annual economic growth outlook positive at +1%, owing to Kenya’s more diversified economy, and more favourable business and consumer indicators.

The second highest-ranking country is Tanzania which achieved the biggest change in rank, rising to second place. After reclaiming the top position at the end of 2019, Nigeria drops to third place, with its economic prospects having been dampened by lower oil prices, increased fuel prices and rising inflation, together with weaker retail prospects.

Ghana is in joint third position and is expected to continue its long-term advances and outperform the regional economic growth average in 2021, buoyed by rising demand for its commodity exports and supportive macro-economic conditions which will facilitate investment and private consumption increases.

South Africa drops one place in the top five, having operated under severe containment measures with one of the strictest global lockdowns impacting the GDP contraction by 6% year-on-year into the third quarter of 2020.  Cote d’Ivoire, Uganda and Cameroon rankings remained unchanged amidst the pandemic period.  While the Ivorian GDP growth forecast is amongst the highest in the region, it is offset by weak consumer prospects with 69% of retailers reporting a decrease in consumer spending and only 11% of consumers willing to try new products.

 The weak business outlook also poses a challenge for Uganda and Cameroon as companies may look to de-prioritise operations in these markets to reallocate resources to top priority markets. Wingfield points out that; “Despite weaker business and economic outlooks also characterising the more established economies of Nigeria, Kenya and South Africa, the reality is that serious investors have to focus on them if they are to achieve significant growth in the region.”

The importance of these proven prospects is borne out by the fact that ‘own business growth expectations’ (how businesses rate their own prospects) have fallen across SSA but are more optimistic than country growth expectations. The biggest differential between these two indicators is in South Africa and Kenya, a clear indication that businesses in these two markets remain firm in their view that favourable growth is achievable, despite adverse macro factors.

In addition, only one in five companies expects value growth declines in the next year. The majority of businesses forecast muted growth between 0 and 5%, but one third (36%) of businesses are more optimistic, predicting their own business growth levels ahead of 5% in 2021 and a sizable 17% of businesses anticipate growth ahead of 10% in 2021 – predominantly in West Africa.

 West Africa: Nigeria, Ghana, Cameroon, Cote d’Ivoire, East Africa: Kenya, Uganda, Tanzania, Ethiopia

 Key challenges

However, turning this optimism into reality will require the elimination of a variety of bottlenecks. For example, the APi report cites overcoming supply constraints as the top factor that has impacted business performance amidst the COVID-19 pandemic and will be key to achieving any significant growth upturn. Closely related to this is product availability and out of stock issues, followed by retail closures and slow reopening.

Wingfield comments; “Many of these factors will remain obstacles in 2021 as resources and logistics remain constricted, especially for imported products. Manufacturers and retailers could face further share fallout as consumers substitute brands and stores for available alternatives, however, this could also work in favour of local origin brands and products, and informal retail.”

Within this reality, a key question will be how businesses pivot and position themselves to overcome these challenges to achieve growth, what level of growth they will aim for and what they intend to focus on to achieve this growth? The APi report shows that the largest proportion, one in five companies, is initiating a strategic business refocus or reprioritisation to reboot their performance in the year ahead.

Sixteen percent are adjusting their route to market/channel/distribution focus and 14% will modify their price and promotion strategies and rationalise their product portfolios to only the most needed products, while only 5% are looking to increase their technology and online investments, despite the massive move to online shopping.

Basket unusual

A critical part of any business success is the needs and wants of the consumers who drive its growth. Income impacts have driven spend redistribution, with consumers compelled to rethink what goes into their baskets as they seek to stretch their spend further while merging old and new needs.

These adjustments reflect a fundamental consumption reset, with consumers carefully evaluating their overall spend and the products that make up their “usual” basket composition. Evidence of this is that across SSA the proportion of consumers spending more in-store has dropped to just 12% (from 21% pre COVID-19), and those willing to try new products has dropped to only a quarter of consumers.

“No matter whether consumers are constrained, insulated or gain access to a vaccine in 2021, they will remain less optimistic about what the future holds. Decisions will be made to adjust the purchase habits shoppers have had in place for years, alongside the current reality where health and value priorities compete side by side. This will impact where consumers shop, what they buy, why they buy and how much they are willing to spend in 2021 and well beyond,” Wingfield concludes.

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.

Economy

NNPC To Resume Oil Exploration In Sokoto Basin

Published

on

NNPC

The Nigerian National Petroleum Corporation on Thursday announced plans to resume active oil exploration in Sokoto Basin.

A statement issued in Abuja on Thursday by NNPC spokesperson, Kennie Obateru, said the corporation’s Group Managing Director, Mele Kyari, said exploration for crude would resume in the Sokoto Basin.

The statement read in part, “Kyari also hinted of plans for the corporation to resume active exploration activities in the Sokoto Basin.”

The NNPC boss disclosed this while receiving the Governor of Kebbi State, Atiku Bagudu, who paid Kyari a courtesy visit in his office on Thursday.

In October 2019, the President, Major General Muhammadu Buhari (retd.), had during the spud-in ceremony of Kolmani River II Well on the Upper Benue Trough, Gongola Basin, in the North-East, said the government would explore for oil and gas in the frontier basins across the country.

He outlined the basins to include the Benue Trough, Chad Basin, Sokoto and Bida Basins.

Buhari had also stated that attention would be given to the Dahomey and Anambra Basins which had already witnessed oil and gas discoveries.

Kyari restated NNPC’s commitment to the partnership with Kebbi State for the production of biofuels, describing the project as viable and in tandem with the global transition to renewable energy.

He said the rice production programme in the state was a definite boost to the biofuels project.

Kyari said the linkage of the agricultural sector with the energy sector would facilitate economic growth and bring prosperity to the citizens.

He was quoted as saying, “We will go ahead and renew the Memorandum of Understanding and bring in any necessary amendment that is required to make this business run faster.”

The Kebbi State governor expressed appreciation to the NNPC for its cooperation on the biofuel project.

Bagudu said the cassava programme was well on course but the same could not be said of the sugarcane programme as the targeted milestone was yet to be attained.

Kebbi state is one of the states that the NNPC is in partnership with for the development of renewable energy.

Continue Reading

Economy

Nigeria To Benefit As G-20 Approves Extension Of Debt Relief Till December

Published

on

Finance ministers of G-20 countries have approved an extension of debt relief for the world’s poorest nations till December 2021.

David Malpass, World Bank president, made the announcement at the virtual spring meeting, on Wednesday.

TheCable had earlier reported that the G-20 countries will meet this week to consider an extension of the debt freeze.

The G-20, is a group of finance ministers and central bank governors from 19 of the world’s largest economies, including those of many developing nations, along with the European Union.

G-20 countries had established a debt service suspension initiative (DSSI) which took effect in May 2020.

Nigeria had benefited from the initiative which delivered about $5 billion in relief to more than 40 eligible countries.

The suspension period which was originally set to end on December 31, 2020 was extended to June 2021.

Malpass said the extension to December 2021 will boost economic recovery and promote job creation in low income countries.

He urged countries to be transparent in their approach to the debt service payment extension.

“On debt, we welcome a decision by the G20 to extend the DSSI through 2021. The World Bank is also working closely with the IMF to support the implementation of the G20 Common Framework,” he said.

“In both these debt efforts, greater transparency is an important element: I urge all G20 countries to disclose the terms of their financing contracts, including rescheduling, and to support the World Bank’s efforts to reconcile borrower’s debt data more fully with that of creditors.

“Participation by commercial creditors and fuller participation by official bilateral creditors will be vital. I urge all G20 countries to instruct and create incentives for all their public bilateral creditors to participate in debt relief efforts, including national policy banks. I also urge G20 countries to act decisively to incentivize the private creditors under their jurisdiction to participate fully in sovereign debt relief efforts for low-income countries.

“Debt relief efforts are providing some welcome fiscal space, but IDA countries need major new resources too, including grants and highly concessional resources. From April to December 2020, the first DSSI period, our net transfers to IDA and LDC countries were close to $17 billion, of which $5.8 billion were on grant terms.

“Our new commitments were almost $30 billion, making IDA19 the single largest source of concessional resources for the poorest countries and the key multilateral platform for support. To recover from COVID, much more is needed, and we welcome the G20’s support for advancing IDA20 by one year.”

Continue Reading

Economy

IMF / Fiscal Monitor Report April 2021 Forecast

Published

on

IMF 1

Unprecedented fiscal support by governments during the pandemic has prevented more severe economic contractions and larger job losses, but risks remain of long-term scarring the International Monetary Fund says in its Fiscal Monitor report released on Wednesday (April 7) in Washington, DC.

Meanwhile, such support, along with drops in revenues, has raised government deficits and debt to unprecedented levels across all country income groups, said Vitor Gaspar, Director of the Fiscal Affairs Department at the IMF.

The first lesson one year into COVID-19 is that fiscal policy can act timely and decisively. The fiscal policy response was unprecedented in speed and size looking across countries. We also learned that countries with easier access to finance or stronger buffers were able to give more fiscal support. They’re also projected to recover faster,” said Gaspar.

Average overall deficits as a share of GDP in 2020 reached 11.7 percent for advanced economies, 9.8 percent for emerging market economies, and 5.5 percent for low-income developing countries. Countries’ ability to scale up spending has diverged.

“So, what have we learned? We’ve learned that fiscal policy is powerful and that sound public finances are crucial in order to enable that power to be used to the fullest,” stressed Gaspar.

Gaspar urged policy makers to balance the risks from large and growing public and private debt with the risks from premature withdrawal of fiscal support, which could slow the recovery.

“In the spring 2021, we emphasize differentiation across countries. Moreover, COVID-19 is fast evolving, as are the consequences from COVID-19. The fiscal policy must stay agile and flexible to respond to this fast-evolving situation.” Said Gaspar.

He also warned that the targeting of measures must be improved and tailored to countries’ administrative capacity so that fiscal support can be maintained for the duration of the crisis—considering an uncertain and uneven recovery

“Moreover, countries are very different in their structures, in their institutions, in their financial capacity and much else. Therefore, policies and policy advice have to be tailored to fit.” Said Gaspar

Gaspar concluded his remarks by emphasizing that global vaccination is urgently needed, and that global inoculation would pay for itself with stronger employment and economic activity, leading to increased tax revenues and sizable savings in fiscal support.

“A fair shot, a vaccination for everybody in the world may well be the highest return global investment ever. But the Fiscal Monitor also emphasizes the importance of giving a fair shot at life success for everyone. It documents that preexisting inequalities made COVID-19 worse and that COVID-19 in turn made inequalities worse. There is here a vicious cycle that threatens trust and social cohesion. Therefore, we recommend stronger redistributive policies and universal access to basic public services like health, education, and social security,” said Gaspar.

Continue Reading

Trending