IMF Revises Global Growth from -3.3% in 2020 to 6% in 2021
The global economy is projected to grow at 6 percent in 2021, moderating to 4.4 percent in 2022. That is a big turnaround from an estimated contraction of –3.3 percent in 2020 when the world was hit by pandemic.
“So relative to our January forecast, we are upgrading growth to 6% for 2021 and 4.4% for 2022. This reflects the additional fiscal support provided in the United States, vaccination efforts that are going to lead to a strengthening of recovery in the second half of this year, and also the continued resilience of economic activity to the pandemic in many parts of the world,” said IMF chief economist Gita Gopinath.
Gopinath stressed that a high degree of uncertainty surrounds the IMF’s projections as the pandemic is yet to be defeated and virus cases are accelerating in many countries.
That’s leading to diverging recoveries both across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliant on tourism do less well.
“The biggest risk right now is still the pandemic, if there are new virus variants that evade the vaccine, then that could lead to a sharp downgrade. But if, on the other hand, there’s faster roll out of vaccinations, then that could uplift the outlook,” said Gopinath.
She also added that multi-speed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways. This could cause inflated asset valuations to unwind in a disorderly manner, financial conditions to tighten sharply, and recovery prospects to deteriorate, especially for some highly leveraged emerging markets and developing economies.
“The second big risk is to financial conditions. We see multispeed recoveries and we have seen interest rates go up. If interest rates go up even further in a more disorderly fashion than that could have negative implications for several countries, especially for some highly vulnerable emerging and developing economies,” said Gopinath
Policy makers will need to continue supporting their economies while dealing with more limited policy space and higher debt levels than prior to the pandemic, Gopinath added. This requires better targeted measures to leave space for prolonged support if needed.
“Given that we are not out of the woods, it is very important for policy support to be continued in this crisis. Of course, countries are dealing with high debt levels, so they’ll have to make sure this support is better targeted and well-tailored to countries specific economic conditions, the stage of the recovery they are in and the structural characteristics of the economy,” she added.
She also urged central banks to keep access to money easy in the current environment.
“Monetary policy should also remain accommodative while proactively addressing financial risks that we do see using macro prudential tools,” said Gopinath.
Nigeria Spends N16.126 Billion Daily on Petrol Subsidy
Nigeria’s daily consumption of Premium Motor Spirit (PMS) commonly known as petrol has risen to 80 million litres, according to the latest data from the Nigerian Petroleum Company Limited (NNPCL).
A breakdown of the data showed that 558.83 million litres of petrol were evacuated between March 4 and 10, 2023, translating to an average daily consumption of 79.83 million litres.
In February 2023, the Group Chief Executive, NNPCL, Mele Kyari had put petrol consumption at around 66 million litres of petrol and declared that the corporation was spending about N202 on every litre of PMS consumed across the country.
“Today, by law and the provisions of the Appropriation Act, there is a subsidy on the supply of petroleum products, particularly PMS imports into our country. In current data terms, three days ago, the landing cost was around N315/litre.
“Our customers are here; we are transferring to each of them at N113/litre. That means there is a difference of close to N202 for every litre of PMS we import into this country. In computation, N202 multiplied by 66.5 million litres, multiplied by 30 will give you over N400bn of subsidy every month,” the GCEO had stated.
Therefore, going by Kyari’s estimation that Nigeria spent N202 a litre as a subsidy will put Nigeria’s daily petrol subsidy cost at N16.126 billion and N483.769 billion per month.
However, the national petroleum corporation has been lamenting the huge resource spent on subsidizing fuel when the majority of people benefiting from it are a few criminals smuggling it to neighbouring countries.
NNPCL explained the danger of the continued practice on the corporation’s cash flow, adding that the funding had been ongoing without refunds from the Federal Ministry of Finance, Budget and National Planning, despite the fact that subsidy had been budgeted for in the Appropriation Act.
“But there is a budget provision for it (subsidy). Our country has decided to do this. So, we are happy to deliver this, but it is also a drain on our cash flow, and I must emphasize this.
“For as we continue to support this, you will agree with me that it will be extremely challenging for us to continue to fund this from the cash flow of the company when you do not get refunds from the Ministry of Finance,” Kyari had stated in Abuja.
Scarcity of Fuel and Naira Set to Plunge Over 28 Million Nigerians into Crisis
A latest report by Cadre Harmonise has revealed that over 28.4 million Nigerians in 26 states and the Federal Capital Territory are expected to face severe crises between June and August this year due to the scarcity of fuel and naira.
This projection includes 18,000 Internally Displaced Persons (IDPs).
Cadre Harmonise is a tool developed as an early warning system to prevent and manage food and nutrition crises in Nigeria.
The report was released in Abuja on Thursday, covering 26 states in Nigeria. It was also stated that about 17.7 million people, including 14,000 IDPs in 26 states and the FCT, were already in crisis or worse by May 2023.
The report pointed out that the naira redesign was one of the major drivers of the crisis in Nigeria, as the withdrawal of old naira notes from circulation created a serious bottleneck to households’ ability to access cash and food commodities.
The prolonged scarcity of Petroleum Motor Spirit commonly called petrol, and the associated hike in the pump price of the commodity across the states led to an astronomical rise in transport fares and cost of food products in Nigerian markets.
The report also highlighted the consistent rise in the price of food commodities and agricultural inputs across Nigerian markets as a major driver of food insecurity. For instance, the consumer price index, which measures inflation, grew from 15.7 percent in February 2022 to 21.9 percent in February 2023 (that is a 39.49 percent point increase) year-on-year.
Insecurity, especially insurgency in the North-East states, particularly in Borno, Adamawa, and Yobe, was also identified as a persistent challenge in the report.
The Cadre Harmonise report was produced with technical and financial support from global, regional, and national partners including the United Nations Food and Agriculture Organisation, World Food Programme, Save the Children, UNICEF, Mercy Corps, among others.
Cash Crunch, Economic Uncertainty Bolster Inflation Rate to 21.91% in February – NBS
Nigeria’s inflation rate continues to upward trend in February as economic uncertainty amid a chronic cash crunch crippled economic activities.
The Consumer Price Index (CPI), which measures the inflation rate, grew at 21.91% rate in the month of February, a 0.09% increase from 21.82% recorded in January, the National Bureau of Statistics (NBS) stated.
On a yearly basis, the inflation rate was 6.21% higher than the 15.70% filed in February of 2022.
According to the NBS, the headline inflation was bolstered by Bread and Cereal (21.67%), Actual and Imputed Rent (7.74%), Potatoes, Yam and Other Tubers (6.06%), Vegetable (5.44%) and Meat (4.78%).
On a monthly basis, inflation moderated by 0.16% in the month under review to 1.71% when compared to 1.87% reported in January 2023. Indicating that in February 2023 price level was 0.16% lower relative to January 2023.
The percentage change in the average CPI for the twelve months period ending February 2023 over the average of the CPI for the previous twelve months period was 19.87%, showing a 3.15% points increase compared to 16.73% recorded in February 2022.
Nigeria’s food inflation rate grew at a whopping 24.35% rate on a year-on-year basis in February 2023 as a few money continues to chase limited food items due to the nation’s new bank policy that made it impossible for people to access their deposited money in the bank.
This was 7.24% points higher when compared to the 17.11% recorded in February 2022. The rise in food inflation according to NBS was caused by increases in prices of Oil and Fat, Bread and Cereals, Potatoes, Yam and Other Tubers, Fish, Fruits, Meat, Vegetable, and Food Product etc.
On a monthly basis, the food inflation rate was 1.90% in February 2023, representing a 0.18% increase from 2.08% in January 2023.
However, the average annual rate of food inflation for the twelve-month ending February 2023 over the previous twelve-month average was 22.12%, which was a 2.44% points increase from the average annual rate of change recorded in February 2022 (19.69%).
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