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Inflation’ll Ease to 13.4% in 2018, Says Economist Group

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Nigerian economy
  • Inflation’ll Ease to 13.4% in 2018, Says Economist Group

The Economist Intelligence Unit of The Economist Group has said inflation, which has maintained a downward streak since the beginning of this year, would ease to 13.4 per cent in 2018.

The EIU gave this projection in a 21-page Country Report on Nigeria, generated on July 1, 2017.

EIU, which presented the country’s Outlook for 2017-21, predicted that while inflationary pressure would stay high in 2019 as a result of pre-election spending and further drop in the value of naira occasioned by weaker oil prices, the rate would drop significantly to an annual average of 10.8 per cent in 2020-21 with tighter fiscal and monetary policy.

According to the report, “The effects of currency devaluation and efforts by the authorities to rein in the subsidy bill and boost power tariffs to cost-reflective levels will see inflation remain high in 2017, at an average rate of 17 per cent. Currency stability improved in the first half of 2017 after the massive volatility seen in 2016, but additional naira depreciation is expected later in 2017, so average inflation will ease only moderately, to 13.4 per cent in 2018. Pre-election spending and a further drop in the naira on the back of weaker oil prices mean that inflationary pressures will stay high in 2019, before it falls back slightly in 2020- 21, to an annual average of 10.8 per cent, as tighter fiscal and monetary policy takes effect.”

The National Bureau of Statistics, which recently released report on the Consumer Price Index for May 2017 put the index, which gauges inflation at 16.25 per cent (year-on-year) in May 2017, representing 0.99 percent points lower than 17.24 per cent in April. The decline is the fourth since January 2017.

Estimating that, in the second half of 2017, Nigeria would post a weak economic recovery from the recession it slipped into in 2016, the EIU report noted that, “ Oil production will pick up following the resumption of supply through the Forcados export pipe line, which had been shut down by militant activity.” Nigeria, it said, remained exempt from production cuts by OPEC.

The EIU, therefore, projected that real gross domestic product (GDP) growth for the full year of 2017 will be positive, but only reaching 0.8 per cent. “A full year of oil output via Forcados will lift export production a little more in 2018, although militant activity will be an ongoing threat and the current OPEC waiver is unlikely to continue if, as we expect, the organisation attempts to maintain global production cuts throughout the year. Export growth will then be slower in 2019-21 as the elongated reform process and militant action constrain development,” it noted.

Besides, it stated that, “Elsewhere in the economy, some pro-business policy reforms and a gradual improvement in infrastructure provision will support the non-oil sector. Overall, real GDP growth should pick up to 2.1 per cent in 2018. We then expect growth to slip back to 1.8 per cent in 2019, given election-related uncertainty, compounded by an expected recession in the US and an ongoing slowdown in China that will spook global markets and lead to a moderation in oil prices.”

Nevertheless, the EIU, in this report, which is the latest on Nigeria, forecast a moderate rebound in growth, to 2.9 per cent in 2021 as local and global markets strengthen. According to the report, “The average growth rate of 2.1 per cent in 2017-21 is weak for a country with a young and expanding population and will hit living standards and job creation—issues that will feed back into threats to political and social stability.”

Similarly, the report noted that, “The federal administration will attempt to continue its expansionary fiscal stance

into 2017-18, in an effort to drag Nigeria out of the recession it entered during 2016

and with the 2019 elections firmly in mind. However, expenditure growth will be hindered by capacity constraints and an inefficient bureaucracy. Indeed, the budget for the 2017 calendar year was only signed into law in June.”

While, the EIU also projected that, “Revenue collection in 2017 will increase strongly in nominal terms as exchange-rate depreciation boosts the value of Nigeria’s oil exports in local-currency terms”, it added that, “as a proportion of GDP, revenue will creep up to just 3.5 per cent, reflecting the narrow revenue base.”

“Oil revenue will continue to grow in 2018 in line with moderate production gains, offsetting a small price drop. The non-oil tax take in 2017-18 will increase in tandem with the recovering non-oil economy and government efforts to

widen the tax base, but this will be from a miniscule base, and oil will remain the dominant revenue source. Overall, we expect the budget deficit to come in at an average of 2.3 per cent of GDP in 2017-18.”

In the same vein, the EIU also predicted that, “Monetary policy will concentrate on attempts to support economic recovery while limiting inflation and supporting the flagging currency. However, this will yield contradictory pressures in the early part of the forecast period, with the private sector desperate for cheaper credit to spur growth, but inflation running high following currency devaluation.”

It added: “On balance, interest rates will not move much, staying high as pressure on the naira continues and inflation remains high. Even as inflation subsides from 2018, interest rates will have to remain at around double-digit levels, on the assumption that the Central Bank of Nigeria (CBN) will return to its preference for currency stability. Rates are likely to fall in 2019-20 as the global economy slows and the monetary authorities attempt to stimulate activity, with Nigeria following suit, before a small increase in 2021 as economic activity picks up.”

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 market.

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Economy

Nigeria’s Main Refineries Record N406.62bn Loss in Two Years

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modular refinery

Port Harcourt, Kaduna, Warri Refinery posts N406.62bn Deficit in Two Years

Nigeria’s three main refineries recorded N406.62 billion loss in two years, according to the audited financial statements from the Nigerian National Petroleum Corporation (NNPC).

The three refineries located in Port Harcourt, Kaduna and Warri have a combined installed capacity of 445,000 barrels per day, however, the refineries have continued to function below the installed capacity.

The audited report showed the Kaduna refinery posted N64.34 billion loss in 2018, better than the N111.89 billion loss reported in 2017.

While Warri refinery filed N44.44 billion loss for 2018, also better than the N81.60 billion loss posted in 2017.

Port Harcourt refinery reported N45.59 billion loss in 2018, down from N55.76 billion loss posted in 2017.

The Nigerian government has spent billions of US dollars in maintaining and trying to improve the dilapidated refineries over the years. However, because of the inability of the three refineries to meet daily petrol demands of the Nigerian people, the Federal Government resulted to importation that has eroded the nation’s foreign reserves.

A recent report from the NNPC showed that Nigeria spent N2.37 trillion on petrol importation between May 2019 and May 2020 despite the nation struggling with falling foreign reserves due to low oil prices.

The weak foreign reserves has disrupted the nation’s economic outlook and weighed on the Nigerian Naira. The Naira has been devalued by 15 percent this year and was recently adjusted from N360 per US dollar exchange rate to N380/US$ for importers and investors to ease pressure on the nation’s foreign reserves.

Last week, at a summit organised by Seplat, Mallam Mele Kyari, the Group Managing Director, NNPC, said the three refineries were all idle despite the money being spent on them.

In Nigeria today, we are importing practically every petroleum product that we consume in this country.

“We are working to make sure that we are able to fix our refineries,” Kyari stated.

All hopes are now on Dangote’s refinery.

Aliko Dangote, Africa’s richest man and the world’s richest black man, is presently constructing a 650,000 barrels per day refinery.

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Osinbajo Says FG Plans to Create 5 Million Jobs

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Buhari and Osinbajo

FG to Create 5m Jobs from Strategic Investments in Manufacturing, Agriculture

Vice President, Prof. Yemi Osinbajo, has said the Federal Government plans to create at least 5 million jobs in the next few years.

Osinbajo, who spoke at the Virtual Presidential Policy Dialogue Session organised by the Lagos Chamber of Commerce and Industry (LCCI), said the Buhari-led administration is focused on job creation.

He, therefore, stated that this would be achieved with strategic investments in key sectors like the manufacturing and agriculture sectors.

The Vice President said, “We are to create jobs and boost our national housing programme. We would be intentional in the support of manufacturers in using our local raw materials. We are seriously engaging the use of cement in building our roads, as it will be cheaper for us and more durable.

“We are targeting electrification of five million households with solar power, and we are supporting SMEs, especially in the pharmaceuticals to enhance the production of personal protective equipment.”

Mrs. Toki Mabogunje, the President of LCCI, who also spoke at the event, expressed concerns over the failure of the Nigerian Customs Service to adhere to the Executive Order which forbids Customs checkpoints around the ports and within given geographical delimitations in the country.

She also noted the slow pace of reforms in the oil and gas sector, one of the nation’s main sectors. According to her, the oil and gas sector was another cause for worry, saying up till now the PIB passed has not been signed by President Muhammadu Buhari.

According to her, “Closure of the land borders has enormous implications for cross border economic activities around the country. The indications are now that the closure is indefinite. While we share the concern of government on issues of security and smuggling, we believe that the indefinite closure of land borders is not the solution to the problem.

“We are excited about the signing of the AFCTA. But we need to get ourselves ready for the pressure of competition inherent in the continental economic integration agenda. A number of commitments were made about the creation of an environment that would enable the private sector to be competition ready. But not much has happened in this regard so far.

“We are aware of the efforts of government to fix our infrastructure, including roads and railways, but funding has remained a major challenge. We would like to see a new funding model with much bigger focus on private sector capital within a Public Private Partnership [PPP] framework for infrastructure development in the country.

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Fuel Scarcity: NUPENG to Commence Strike on Monday

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Petrol Importation

Lagosians Should Brace for Fuel Scarcity as NUPENG Embarks on Strike

Nigerians should brace for fuel scarcity as the national leadership of the Nigeria Union of Petroleum and Natural Gas (NUPENG) directed all petroleum tanker drivers to withdraw their services from Lagos State starting from Monday, 10 August 2020.

In a statement released by NUPENG on Friday, the union said the directive followed the failure of various authorities in Lagos State to address three major issues that had impacted the operations of petroleum tanker drivers in the state for several months.

The statement signed by the National President, Williams Akporeha and the General Secretary, Olawale Afolabi, NUPENG and titled title ‘NUPENG leadership directs withdrawal of services by petroleum tanker drivers in Lagos State with effect from Monday, August 10, 2020,’ noted that members of the union are frustrated and pained by the barrage of challenges faced while carrying out their activities in Lagos State.

NUPENG said, “The entire rank and file members of the union are deeply pained, frustrated and agonised by the barrage of these challenges being consistently faced by petroleum tanker drivers in Lagos State and are left with no other option but to direct the withdrawal of their services in Lagos State until the Lagos State Government and other relevant stakeholders address these critical challenges.

“It is sad and disheartening to note here that we had made several appeals and reports to the Lagos State Government and the Presidential Task Force for the decongestion of Apapa on these challenges but all to no avail.

NUPENG listed the major challenges faced by petroleum tanker drivers in Lagos State as extortion and harassment by various security agents and, area boys’ (miscreants).

This menace must stop and the leadership of these security operatives in Lagos State must go all out to call their men to order with immediate effect.

The Union added that it is sad that the security agents who were expected to ensure the free flow of traffic and protection of road users were the same people using their uniforms and arms to intimidate, harass and extort money from petroleum drivers in Lagos State.

Therefore, it said it had embarked on an indefinite strike to force the Lagos State Government to address the situation.

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