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Nigeria’s Economic Crisis May Spill to W’Africa – IMF

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IMF
  • Nigeria’s Economic Crisis May Spill to West Africa 

The International Monetary Fund has warned that the current economic crisis in Nigeria may spill over to the rest of West Africa with negative consequences.

It also raised the alarm that Nigeria was spending too much of her revenue to service debts, noting that this was not sustainable.

The Assistant Director and Head of Fiscal Policy and Surveillance Division, Fiscal Affairs Department, IMF, Catherine Pattillo; and the Director, Fiscal Affairs Department, IMF, Vitor Gaspar, said this on Wednesday at a press conference on the IMF Fiscal Monitoring Report as part of the World Bank/IMF Annual Meetings in Washington DC, United States.

They insisted that the fact that about 45 per cent of the Federal Government’s revenue was being paid as interest on the nation’s debt was a worrying development.

Pattillo said, “The slump in oil production and slow growth have created challenges for Nigeria. But one statistic that is quite striking to me is that the debt profile is weakening and the interest account payment is more than 45 per cent of the Federal Government’s revenue. The priority is a big challenge.

“On the fiscal side, the important priority should be in safeguarding fiscal sustainability, which means, importantly to increase non-oil revenues and implement an independent price-setting mechanism that minimises fuel subsidy. So, these are two priorities, while also of course, improving public service delivery so that citizens can see the benefits of good governance and services financed by the government.

“So, these are the challenges. As you know, Nigeria is a very important economy in the African region and its success has positive spill over for the region, particularly in West Africa, and its challenges create difficulties for its neighbours.”

On his part, Gaspar said, “Message number one is that if you look at the global debt and deficit landscape in the world, you’ll see that the countries that have the highest public sector deficit are oil exporters; Nigeria is in debt and it is a country much hit by very low oil prices.

“That is a general message because it applies to oil exporters in general; the group of oil exporters have shared some characteristics.

“The most important point, in my view, is that for countries in sub-Saharan Africa to deliver on the SDGs, the key challenge is the building up of revenue mobilisation capacity through tax capacity building; that’s a key priority.”

He added, “These countries must improve their capacities to raise revenue, and why is that so? Because there is such need in term of public infrastructure, there is such need in terms of public education; there is such need in terms of health.

“For these group of countries, public finance/fiscal policy is part of the overall development strategy, and in that, tax capacity is a fundamental cornerstone.”

Meanwhile, the Minister of Finance, Mrs. Kemi Adeosun, has condemned multilateral funding agencies and Western nations for blocking an attempt by Nigeria to generate electricity from coal on the excuse that the project is not ‘green’.

She said this at the ongoing annual meetings of the World Bank/International Monetary Fund in Washington DC, United States of America on Wednesday.

According to her, it is hypocritical to block the project at a time Nigeria needs power most.

Although Adeosun did not give details of the project, she said it was blocked because of its likely contribution to carbon emission, but noted that most developed countries still relied on coal as a means of generating electricity.

The minister, who spoke on infrastructure funding for Africa, said, “I think there is a need for consistency around bankable projects that can attract investments. Yes, we do need macroeconomic stability. We also do need consistency of policies by the multilateral institutions and Western countries.

“Let me give you an example. In Nigeria, we have coal and there is power inadequacy. It doesn’t take a genius to work out what it will take to get coal-fired power. Yet, we are being blocked. I think there is some hypocrisy in that. We have an entire Western industrialisation that was built on coal-fired energy and that is the competitive advantage that has been used to develop Britain, where I grew up. Now, Africa wants to do it, and they are saying it’s not green, we can’t do it and that we should go and do solar and wind, which are the most expensive power projects in the world.

“Yes, we are going to have the narrative around infrastructure; we must invest in infrastructure, but we must also make sure the playing field is level. The West, after polluting the atmosphere for 100 years, and when Africa wants to explore its resources, they say no.

“Yes, we would come up with bankable projects and we would behave ourselves, but I think we also need to be firm.”

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 long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

Economy

Citigroup Sees $60 Per Barrel Crude Oil in the Next 12 Months

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Crude oil

Citigroup Says Crude Oil Will Reach $60 Per Barrel in a year

Despite the current economic downturn and the projected second phase of COVID-19, Citigroup, a New-York based financial service company, has said oil price could hit $60 per barrel in the next 12 months.

Citigroup disclosed this on Thursday during a virtual EMEA Media Summit titled – ‘Navigating the Future: What’s Next in a Post-COVID-19 World’.

“After a substantial underperformance in the last six months relative to several other commodities, crude will eventually bounce back to around $60 per barrel over the next 12 months,” Max Layton, European Head of Commodities Strategy, Citigroup said while giving a presentation on the outlook for commodities in the second half of 2020, and into 2021.

This means Brent crude oil would rise by at least 50 percent from the current level of $42 per barrel in the next 12 months.

“It’s going to be a function of the demand and supply but recently we have been seeing a spike in the demand for some of the commodities,” said Atiq Rehman, Head of EMEA Emerging Markets, Citigroup.

“A lot of these economies are heavily commodity-dependent, and perhaps, in the past have been guilty of not diversifying when they come under pressure. I think perhaps, this recent moves will push them to diversify away from simply commodities,” Grant Carson, Head of TRUK And Non-Presence Countries, Citigroup, stated citing Russian as one of the countries that have recorded success in diversifying away from crude oil.

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Economy

Oil Sustains $42 Price Level as OPEC Output Drops to Over Two-Decade Low

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Oil price

OPEC Oil Output Drops to Over Two-Decade Low in June

Crude oil sustained $42 per barrel price level following a recent survey conducted by Reuters that showed the Organisation for the Petroleum Exporting Countries (OPEC) managed to cut oil production to over two-decade low in the month of June.

According to the survey, OPEC’s 13 members pumped 22.62 million barrels per day in June, 1.92 million barrels per day below May’s revised figure. The lowest since May 1991.

OPEC and allies, together referred to as OPEC plus, had agreed to cut oil production by 9.7 million barrels per day in the month of April to rebalance the global oil market and prop up prices amid COVID-19 pandemic.

OPEC’s share of the 9.7 million barrels per day production cut was 6.084 million bpd but OPEC delivered 6.523 million bpd cut in the month of June despite the inconsistencies from Nigeria, Angola and Iraq.

In June, Saudi Arabia reduced production by 1.13 million barrels per day to 7.53 million bpd. While Kuwait and the United Arab Emirates met their quota but struggle to fulfill the extra cuts.

Nigeria, Iraq and Angola continue to struggle in the month of June. However, their performance improved compared to May as Nigeria attained 77 percent compliance level, up from 19 percent in May.

While Iraq and Angola achieved 70 percent and 80 percent compliance level, respectively. Nigeria and Iraq have pledged to cut more in July despite their economic challenges. Angola, however, said it would not be able to cut extra oil production until October.

Brent crude oil, against which Nigerian oil is measured, rose to $42.48 per barrel on Friday as at 2:58 pm Nigerian time.

UKOilDaily

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Economy

Nigeria Labour Congress Says No Fuel Increase Amid COVID-19 Pandemic

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No Fuel Increase During COVID-19 Pandemic, Says Nigeria Labour Congress

The Nigeria Labour Congress (NLC) on Thursday rejected the new fuel price announced by the Petroleum Products Price Regulatory Agency (PPPRA) on Wednesday.

In a statement issued by Ayuba Wabba, the President, NLC, the labour demanded instant reversal to the old price, saying the move will kill businesses and worsen the nation’s poverty level at a time when nations are looking to ease economic burden of their citizens and mitigate negative impacts of COVID-19.

The PPPRA had raised the value band of Premium Motor Spirit, commonly referred to as Petrol, to between N140.80 and N143.80 per litre on Wednesday because of the recent increase in crude oil prices.

Nigeria Labour Congress argued that “PPPRA contradicted itself when it said that the latest price increase described as an “advisory” was meant to regulate a product that government claims had been de-regulated.

“That this new hike in the pump price of petrol was announced without the approval of the board of the PPPRA and the oversight ministry speaks volume of the arbitrariness and public contempt in the operations of PPPRA. We find this deeply disturbing.

“It is also very embarrassing that the PPPRA boss, while trying to defend the indefensible, appeared to be out of sorts and ready to clutch at any available straws to sell his ice block merchandise to Eskimos.

“Apart from contradicting himself that PPPRA is still trying to regulate a deregulated product through ‘advisories’, the PPPRA went on to exert more nails on the coffin of his polemics when he argued that PPPRA was just like the Central Bank of Nigeria, CBN, and the National Insurance Commission, NAICOM, that would always act to protect the public interest.

“That was how far the niceties went. The rest of the statement by the PPPRA boss was about how PPPRA plans to protect investors and increase their profit.”

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