Global growth prospects have worsened significantly due to the combined effects of inflation, war in Ukraine and lingering pandemic, the IMF announced on Tuesday (April 19).
Those impacts are outlined in the World Economic Outlook report, released at the beginning of the Spring Meetings of the IMF and World Bank in Washington, DC by new chief economist, Pierre-Olivier Gourinchas.
“Well, there is a significant downgrade to our growth projections for the global economy from 4.4 percent as of January to 3.6 percent in our latest update. 0.8 percentage point difference. There are three main reasons for this downgrade. First, the war invasion of Ukraine by Russia, which is increasing energy and commodity prices around the world and is leading to less output and more inflation.
“Inflation is higher in most countries and is expected to persist longer. In addition, we have a slowdown of the Chinese economy with more frequent lockdowns due to Omicron that is weighing down and then also elevated price pressures in many parts of the world or leading central banks to tighten monetary policy controls.” Said Pierre-Olivier Gourinchas, IMF’s Chief Economist.
Overall risks to economic prospects have risen sharply and policy trade-offs have become ever more challenging.
“Well, there are a number of important downside risks to our forecast. First, let me start with the war itself. The conflict could escalate, the sanctions could become broader, and this is clearly that would weigh down on economic activity. Second, inflation pressures are building up. Some countries, like the US, inflation is at the highest level in 40 years.
“There is a risk that this could persist and would call for more forceful action by central banks that would weigh down on output and economic activity. Third, the COVID 19 pandemic is still with us. We could see the emergence of new variants that are resistant to vaccines that would cause more lockdowns and disrupt global supply chains. Fourth, we could have in the context of tightening policy rates around the world, we could see also more financial instability. Many countries might find that capital flows out, currencies could start depreciating. This financial instability is another factor. Lastly, we have also the potential for social unrest given the increase in energy and food prices in many countries,” added Gourinchas.
Even as policymakers focus on cushioning the impact of the war and the pandemic, attention will need to be maintained on longer-term goals.
“Well, our advice to policymakers is first, do everything we can to end the war now. Beyond that, we can think about monetary policy, fiscal policy and health policy. For monetary policy, central banks need to act decisively to make sure that inflation expectations remain well anchored and not drifting away from central bank targets. At the same time, they need to act in a nimble and data dependent way to support growth and make sure that the hiking cycle that should happen is not going to be disruptive.
“On fiscal policy, the trade off is different. It’s between rebuilding fiscal buffers on the one hand and protecting vulnerable populations that have been hit by the increase in energy and food prices. So our advice is first. In countries where the health situation allows, withdraw the support that was put in place in the last two years, then to address vulnerable populations, implement targeted and temporary policies that will help them face higher prices for food and energy.
“This can take different forms, in the form of utility bill discounts, in the form of subsidies for food and energy prices as long as they are temporary and there are clear sunset clauses, and that all of these policies are inscribed in fiscal frameworks, medium term fiscal frameworks so as to ensure fiscal sustainability.
“Finally, on health policy, we need to implement a comprehensive toolkit with monitoring, tests, vaccines and treatments to make sure that all countries can emerge from the COVID 19 pandemic. And this will also require international donors to complete the funding for the international tools that we put in place with funding needs that are around $23.4 billion,” said Gourinchas.
Fuel Scarcity: Car Owners Abandon Vehicles as Nigerian Masses Stage Protest
As the fuel scarcity bites harder across the country, vehicle owners have been abandoning their vehicles and opting for public transportation.
Investors King reports that some other Nigerians, especially civil servants have resigned to fate by trekking to work while others who could afford skyrocketing transport fares were moving around in public vehicles.
Findings across some states revealed that a litre of Premium Motor Spirit, popularly known as petrol, was being sold between N280 and N350.
This came as downstream petrol marketers have blamed the Nigerian National Petroleum Commission (NNPC) for only selling the petroleum products for private depots owners and ignoring retailers whose numerical strength outweighs that of the major marketers.
The scarcity is worsened because most filling stations were not operating while the few that are selling the product are struck with long queues, fighting and bribery.
At various Government Secretariats and other offices checked by Investors King, it was observed that the parking spaces were not filled with vehicles as it was usually done.
A civil servant who did not want his name mentioned lamented the fuel scarcity and hike in fuel price saying, “I have no choice than to keep my vehicle at home. My office doesn’t want to listen to excuse of wasting time at filing stations in search of fuel. So, I have to opt for public vehicle so that I won’t be sacked.”
Meanwhile, some aggrieved Nigerians have staged protests over fuel scarcity and the expensive prices of fuel and called on the Federal Government of Nigeria to find a lasting solution to the challenge.
The protesters blocked the Lagos Benin Expressway at Oluku Junction in expression of their displeasure, saying that hike in fuel is contributing negatively to skyrocketing prices of food items.
Many commuters and other road users were stranded during the demonstration as the busy road was totally blocked for hours.
“We can’t continue to experience this pain. We are tired. Government should find lasting solution to this issue. We are here just to let the world know that we are not happy and this fuel scarcity is really affecting us negatively. Enough is enough,” one of the protesters said.
There was no vehicular movement when the protesters, mostly youths, stormed the road.
Meanwhile, commercial motorists have been warned against steps they take in a bid to minimize the fuel consumption of their vehicles which could lead to loss of lives and property.
Speaking, the Executive Secretary, Office Of Transportation, Engr. Bilal Adiat said because petrol is scarce and expensive, hence commercial motorists are now improvising ways of reducing the fuel consumption of their vehicles so as to maximize profit.
Bilal said most of the steps taken by the commercial drivers are against the mechanical set-up of the vehicles which could lead to fire disaster and loss of lives and properties, urging for both motorists and Nigerians at large to be wary of the dangers inherent in keep fuel in gallons.
Despite Nationwide Blackout, FG Reveals Discos Failed to Utilise 1,070.36MW
As major parts of Nigeria continue to complain of blackout, the Federal Government has revealed that Electricity utility firms otherwise known as the DisCos had a total of 1,070.36 megawatts unused between December 24 and December 30, 2022.
For most Nigerians, prolonged power outage they experience could be attributed to lack of sufficient megawatts within the reach of the power utility companies.
Discos had lamented low power supply from generating companies (GenCos), which they attributed the blackout to.
While blaming GenCos for the incessant drop in electricity supply, DisCos through a statement from Ikeja Electric said it has been shedding load owing to low power allocation.
The General Manager of the Corporate Communication Department, EKEDC, Godwin Idemudia, while apologising to customers, especially those affected by the power outage, lamented a sharp decrease from the electricity it gets from the grid, saying it was not enough to meet the demand of its customers.
Hence, the continued lamentation of electricity consumers who are at the receiving end of the excuses proffered.
But, contrary to the argument and excuse adduced by EKEDC, latest power utilisation data obtained from the Transmission Company of Nigeria, an agency of the Federal Government, revealed that the Discos did not utilise the over 1,070MW of electricity between December 24 and December 30, 2022.
Nigeria has 11 Discos including Abuja, Benin, Eko, Enugu, Ibadan, Ikeja, Jos, Kaduna, Kano, Port Harcourt and Yola.
Figures from TCN showed that there are electricity that utility firms were not releasing to electricity consumers.
On December 24, 2022, the figures showed that a total of 118.04MW of electricity was unused by Enugu, Ibadan and Port Harcourt Discos, while the eight other power distributors took and distributed excess load on that day.
Also, on December 25, nine power distributors obtained excess load allocation, but two others including Enugu and Ibadan, could not distribute a total of 93.73MW of electricity.
However, the next day, being December 26, the quantum of unutilised energy increased, as seven Discos, including Abuja, Benin, Enugu, Ibadan, Jos, Kano and Port Harcourt, failed to distribute a total of 198.82MW of electricity.
While four companies took excess load allocation, according to TCN’s data, six of the power firms were said to be unable to distribute 180.99MW of electricity on December 27, as the remaining five took excess load allocation.
The data further revealed that the six Discos that could not distribute the 180.99MW of electricity include Abuja, Enugu, Ibadan, Jos, Kano and Port Harcourt.
The transmission company further stated that five distribution companies comprising of Benin, Enugu, Ibadan, Jos and Port Harcourt, could not distribute 89.09MW of power on December 28.
TCN stated that five Discos accepted excess load allocation that was more than their maximum load nomination for that particular day.
Nigeria’s Economy to Grow at a Subdued Pace in 2023 – CBN
The Central Bank of Nigeria (CBN) has said Nigeria’s economy would grow at a subdued rate in 2023 following a series of weak economic fundamentals.
The apex bank stated in the communique no 146 of the monetary policy committee signed by Godwin Emefiele, the Governor of the central bank, and obtained by Investors King.
According to the committee, global economic uncertainties heightened by Russia’s invasion of Ukraine, Covid-19 cases in China, rising interest rates and the surge in commodities prices are expected to spill over given Nigeria’s economic structure as a commodity-dependent nation.
Also, Nigeria’s rising inflation rate ahead of general elections is one of the factors that will weigh on growth in 2023 while the high unemployment rate, foreign exchange scarcity, and waning consumer buying power amid slowing new job creation are estimated to compound Nigeria’s woes.
On Tuesday, the monetary policy committee raised borrowing costs by 100 basis points to 17.5% from 16.5% despite the nation’s slowing growth. Nigeria’s economy grew at 3.54% in the second quarter of 2022 before slowing to 2.25% in the third quarter of 2022.
While there were reports that Electricity distribution companies (DisCos) have silently increased tariffs by as much as 19% since December 1, 2022 even with the fuel scarcity.
The Socio-Economic Rights and Accountability Project (SERP) on Monday filed a lawsuit against President Buhari over “the failure to reverse the unlawful, unjust, and unreasonable increase in electricity tariff, and to probe the spending of public funds as ‘investments and bailouts’ to DisCos and GenCos since 2005.”
Similarly, there are plans to remove fuel subsidy by the second half of 2023 in order to rein in expenditures and boost revenue.
All this at a time when the unemployment rate and earnings are at a record low, Naira to the dollar exchange rate at N750/$1 on the parallel market and manufacturing activities slowdown due to forex challenges would hurt growth in 2023.
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